"Has the IRS contacted you about unpaid taxes? Are you worried about them taking money directly from your bank account? It's a stressful situation, but understanding the process can empower you to take action. Let's break down how long it takes for the IRS to pull money from your bank account and what you can do about it."
When the IRS is looking to collect unpaid tax debts, one of the most impactful tools they can use is a bank levy. Unlike simply owing money, a levy is a legal seizure of your assets. It's crucial to understand the timeline and your rights if you find yourself in this situation.
Understanding the IRS Bank Levy Process: A Step-by-Step Guide
It's important to differentiate between making a payment to the IRS (which you initiate) and the IRS levying your account (which they initiate to collect a debt). This guide focuses on the latter – when the IRS takes enforcement action.
Step 1: The Initial Notices – The Foundation of IRS Collection Efforts
Before the IRS can directly pull money from your bank account, they must follow a specific legal process involving a series of notices. This isn't an overnight process; it typically spans several months.
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Sub-heading: Notice and Demand for Payment (Initial Bill)
- This is the first step the IRS takes when you owe taxes. You'll receive a bill (Notice and Demand for Payment) indicating the amount due. It's your opportunity to pay the debt.
- Action Required: Do not ignore this notice. This is your chance to address the debt before more severe actions are taken. If you can pay, pay it. If not, start exploring options.
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Sub-heading: Series of Reminder Notices (e.g., CP501, CP503, CP504)
- If you don't respond to the initial notice, the IRS will send out further reminder notices, often with increasing urgency. These notices reiterate the amount owed and the potential consequences of non-payment.
- Key Point: These notices are designed to prompt you to act. Each notice serves as a warning that collection actions are escalating.
Step 2: Final Notice of Intent to Levy and Your Right to a Hearing – The Critical Window
This is a critical juncture in the IRS collection process.
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Sub-heading: Receiving the Final Notice (Letter 1058 or CP90/CP297)
- The IRS will send a "Final Notice of Intent to Levy and Notice of Your Right to a Hearing" (commonly Letter 1058 or CP90/CP297). This notice explicitly states their intention to seize your assets, including bank accounts.
- Timeline: After this final notice is issued, the IRS must wait at least 30 days before taking direct action. This 30-day period is your last chance to proactively resolve the issue before a levy is placed.
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Sub-heading: Your Right to a Collection Due Process (CDP) Hearing
- Contained within the Final Notice is information about your right to a Collection Due Process (CDP) hearing. This is a crucial opportunity to appeal the levy action.
- Action Required: You have 30 days from the date of the Final Notice to request a CDP hearing by filing Form 12153, Request for a Collection Due Process or Equivalent Hearing. Requesting this hearing can temporarily halt IRS collection efforts while your case is reviewed. This allows you to present your case, negotiate payment terms, or dispute the tax debt.
Step 3: The Bank Levy is Issued – The Freeze Period Begins
If you fail to respond to the Final Notice or if a resolution isn't reached through a CDP hearing, the IRS can proceed with issuing a bank levy.
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Sub-heading: The IRS Contacts Your Bank
- The IRS will issue a levy notice to your bank.
- Important Note: You may not receive a direct notification from the IRS that the levy has been sent to your bank. Often, taxpayers discover a bank levy when transactions are declined or their account shows a frozen balance.
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Sub-heading: The 21-Day Holding Period (Bank Freeze)
- Once your bank receives the levy notice, they are legally obligated to freeze the funds in your account up to the amount specified in the levy.
- The bank must hold these funds for a period of 21 calendar days before transferring them to the IRS.
- This 21-day period is your last, urgent window to act. During this time, the money is frozen, but it hasn't yet been sent to the IRS. You cannot access these funds.
- Crucial Action: If your bank account is levied, contact the IRS immediately (or a tax professional). You may be able to get the levy released by:
- Paying the tax debt in full.
- Entering into an installment agreement (payment plan).
- Demonstrating immediate economic hardship.
- Proving the levy was wrongful.
Step 4: Funds are Transferred to the IRS – The Levy is Executed
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Sub-heading: Funds Sent to the IRS
- If no action is taken to release the levy during the 21-day holding period, your bank is required to transfer the frozen funds directly to the IRS.
- Timeline: This typically occurs immediately after the 21-day hold expires.
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Sub-heading: Levy Satisfaction
- Once the funds are transferred, the levy is considered executed for that specific amount.
- Note on Continuous Levies: Unlike wage levies (which can be continuous), a bank levy is generally a one-time seizure of funds present in the account at the time the levy is processed. However, the IRS can issue multiple bank levies if the debt remains unpaid and they identify other accounts.
Summary of Timeline (IRS-Initiated Levy):
- Initial Notices: Weeks to months.
- Final Notice of Intent to Levy: At least 30 days before levy action.
- Bank Freeze (21-Day Hold): 21 calendar days once the bank receives the levy.
- Funds Transferred to IRS: Immediately after the 21-day hold.
In essence, from the moment your bank receives a levy notice, it takes 21 days for the money to be pulled and sent to the IRS. However, the entire process from the initial unpaid bill to the actual levy can take several months, giving you opportunities to resolve the debt.
What if I'm Making a Payment to the IRS (Direct Pay/Debit)?
This is a different scenario from a levy. If you are voluntarily making a payment to the IRS via direct debit from your bank account (e.g., when filing your tax return or setting up a payment plan), the timeline is much shorter and more predictable.
- IRS Direct Pay: If you use IRS Direct Pay, your payment is generally processed within 1 to 2 business days. You can schedule payments up to 365 days in advance and will receive an email confirmation.
- Electronic Funds Withdrawal (EFW) through Tax Software/Professional: When you e-file your return and choose to pay via EFW, the payment is typically withdrawn on the date you specify (e.g., the tax deadline). It may take up to 2 business days for the transaction to reflect.
- Direct Debit Installment Agreements (DDIA): For approved installment agreements with direct debit, payments are typically withdrawn automatically on the scheduled due date. You can usually see these payments reflected in your IRS online account approximately four days before they are withdrawn.
Key Difference: When you initiate a payment, you control the payment date. When the IRS levies, they control the timing after the required notices and waiting periods.
Ten Related FAQs (How To...)
How to check if the IRS is trying to levy my bank account?
You will typically receive a "Final Notice of Intent to Levy and Notice of Your Right to a Hearing" (Letter 1058 or CP90/CP297) at least 30 days before a levy is placed. If you suspect a levy, contact your bank or the IRS directly.
How to stop an IRS bank levy once it's issued?
During the 21-day holding period, you can contact the IRS to arrange payment, set up an installment agreement, or demonstrate economic hardship. If successful, the IRS can issue a levy release to your bank.
How to get money back after the IRS has already taken it from my bank account?
It's much harder to get funds back once they've been sent to the IRS. You would need to prove the levy was wrongful or caused significant economic hardship, and typically this requires formal procedures like an Offer in Compromise or proving the debt was incorrect.
How to set up an IRS payment plan to avoid a levy?
You can set up an installment agreement online via the IRS's Online Payment Agreement tool if you owe less than $50,000 (individuals) or $25,000 (businesses) in combined tax, penalties, and interest and have filed all required returns. You can also apply by phone or mail.
How to appeal an IRS levy decision?
You can request a Collection Due Process (CDP) hearing by filing Form 12153 within 30 days of receiving the "Final Notice of Intent to Levy." This hearing allows you to challenge the levy.
How to contact the IRS about a bank levy?
The IRS provides specific phone numbers for collection inquiries. You can also find contact information on the levy notices you receive. Be prepared with your Social Security Number/Taxpayer Identification Number and relevant notice numbers.
How to know if my direct debit payment to the IRS went through?
You can check your IRS online account, review your bank statement, or contact your bank directly. Payments made via IRS Direct Pay or EFW usually show up within 1-2 business days.
How to change the bank account for an IRS direct debit payment?
If you have an existing Direct Debit Installment Agreement, you can typically change your bank account information through the IRS Online Payment Agreement tool or by contacting the IRS.
How to avoid IRS bank levies in the future?
The best way is to file all required tax returns on time and pay any taxes owed by the deadline. If you cannot pay, proactively contact the IRS to explore payment options like installment agreements or offers in compromise before collection actions escalate.
How to find out my exact tax debt amount with the IRS?
You can view your tax account information, including your current balance, payment history, and any scheduled payments, by accessing your IRS Online Account on IRS.gov.
