No one wants to find out that their bank account has been frozen. You might have noticed that your debit card was declined while you were paying for groceries, an automatic bill payment didn’t go through, or your bank notified you that the IRS had placed a levy on your account. No matter how you discovered it, you need to know what happens next.
So, how long can the IRS freeze your bank account? In many cases, when the IRS issues a bank levy, the funds in your account are held by the bank for 21 days before they are sent to the IRS. Fortunately, that window gives you an opportunity to take action before the money is transferred.
What Happens When the IRS Freezes Your Bank Account?
When the IRS freezes a bank account, this is known as a bank levy. This allows the IRS to collect unpaid federal tax debt by directing your bank to hold money in your account. Once the bank receives the levy, it freezes the amount specified in it. This can be up to the amount of your tax debt.
When this happens, it can make it difficult to pay everyday expenses or access money. Unfortunately, many taxpayers feel caught off guard when a levy occurs.
How Long Can the IRS Freeze Your Bank Account?
The bank must hold the funds subject to the levy for 21 days before sending the money to the IRS.
During this 21-day holding period, you have a chance to address the issue. During that time, you may be able to:
- Resolve your tax debt
- Work with the IRS to reach an agreement
- Determine whether there are legal grounds to request that the levy be released
If no action is taken during that period, the bank will send the frozen funds to the IRS. Since the timeline moves quickly, you don’t want to wait and see what happens. That can limit your options.
What Does the IRS Take Out of Your Bank Account?
An IRS bank levy applies to the funds that are in your account when the bank receives the levy. It does not automatically mean the IRS will take every dollar you have.
However, if the amount in your account is less than what you owe, the IRS may pursue other collection methods or issue additional levies if the tax debt remains unresolved.
Depending on your circumstances, it may still be possible to resolve the situation before the funds are transferred to the IRS. Sometimes, the IRS may release a levy if:
- The tax debt has been paid.
- The levy was issued in error.
- Releasing the levy will help facilitate collection of the tax.
- The levy is creating an economic hardship.
- Another resolution is reached with the IRS.
Whether a levy can be released depends on the facts of your case. Once again, you want to act as soon as you learn your account has been frozen.
What Should You Do?
Discovering that you cannot access your money is stressful. However, you do not want to ignore the situation. The sooner you take action, the more options you may have. And you want to reach out to an IRS tax attorney in Knoxville.
If your account has been frozen because of an IRS levy, you may want to take the following steps:
- Read any notices you have received from the IRS.
- Contact your bank to understand the amount affected by the levy.
- Collect records related to your tax debt and financial situation.
- Avoid missing important IRS deadlines.
- Speak with an experienced tax attorney as soon as possible.
Taking quick action may improve your chances of finding a solution before the 21-day holding period expires.
Don’t Wait to Explore Your Options
How long can the IRS freeze your bank account? There is no unlimited timeline. This can only be done for 21 days, and you must act quickly to resolve the issue. At DeVore Law, PLLC, we help taxpayers with IRS collection actions, including bank levies and other tax enforcement matters. If the IRS has frozen your bank account or you have questions about your legal options, our team is here to help. Contact us today to schedule a consultation.
