IRS Bank Levy — Definition Glossary

Defined by Sarah Mitchell, CPA | Reviewed by: James Okafor, EA

Full Definition

An IRS bank levy is a legal seizure of funds in a business’s bank account to satisfy a delinquent tax debt. Before levying, the IRS must issue a Final Notice of Intent to Levy (Letter 1058 or CP90), giving the taxpayer 30 days to respond, request a Collection Due Process (CDP) hearing, or make payment arrangements. When the 30-day window expires, the IRS notifies the bank, which must immediately freeze funds equal to the levy amount. The bank holds those funds for 21 days — during which the business can arrange financing or negotiate a levy release. After 21 days, the bank remits the frozen funds to the IRS. The levy continues against all future deposits until the tax debt is satisfied.

Why This Matters for Businesses With Tax Debt

Understanding IRS Bank Levy is essential for any business owner navigating IRS enforcement. This term directly affects the options available for resolving business tax debt — including whether tax debt financing is available, how lien subordination works, and what enforcement the IRS can take.

Related Terms

Collection Due Process, IRS Levy Release, Notice of Levy

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Type of Tax Debt *-- Select Tax Debt Type --IRS 941 Payroll Tax DebtFederal Tax LienIRS Bank Levy (Active Now)Trust Fund Recovery Penalty (TFRP)State Tax DebtOIC Bridge FinancingMultiple Types

Approximate Tax Debt Amount *-- Select Amount --$10,000 - $25,000$25,000 - $50,000$50,000 - $100,000$100,000 - $250,000$250,000 - $500,000$500,000+

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Sources: IRS.gov; Internal Revenue Code (IRC); IRS Publication 594 (The IRS Collection Process); IRS Publication 1 (Your Rights as a Taxpayer). Tax Funds is a financing marketplace — not a lender, CPA firm, or law firm. This content is for informational purposes only.