IRS Levy Release — Definition Glossary

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

Full Definition

An IRS Levy Release is the IRS action that stops an existing levy and, in the case of a bank levy, returns any frozen funds to the taxpayer. The IRS is required by IRC Section 6343 to release a levy when: the tax debt is paid in full; the taxpayer enters an installment agreement that the IRS approves; the IRS determines collection is creating economic hardship; the property’s fair market value exceeds the tax debt and releasing the levy would not hinder collection; or the liability becomes unenforceable due to the expiration of the collection statute. For business bank levies, a levy release within the 21-day hold period returns the frozen funds. After the 21-day period, released funds cannot be recovered.

Why This Matters for Businesses With Tax Debt

Understanding IRS Levy Release 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

IRS Bank Levy, Notice of Levy, Collection Due Process

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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.