IRS Bank Levy on a Business: The 21-Day Hold and How to Stop It
By Sarah Mitchell, CPA | Reviewed by: James Okafor, EA
What Is an IRS Bank Levy?
A bank levy is a legal seizure of funds on deposit in your business bank account on the day the levy is served. Unlike wage garnishment which is ongoing, a bank levy is a one-time seizure of whatever is in the account when the levy arrives. The IRS issues a levy by serving Form 668-A (Notice of Levy) on the bank. The bank must comply immediately. The business receives a copy simultaneously.
The 21-Day Hold Period
Under IRC 6332(c), banks that receive an IRS bank levy must hold seized funds for 21 calendar days before turning them over to the IRS. This 21-day period allows the taxpayer to arrange payment or demonstrate the levy was improper. During the hold: frozen funds cannot be withdrawn; checks written before the levy may bounce; incoming deposits after the levy date are NOT frozen (only funds present on levy day are seized); and the business continues operating without the levied funds. The 21 days begin on the date the bank receives the levy notice, not the date you receive it.
Notices That Precede a Bank Levy
CP14 (first balance due notice), CP501/502/503 (escalating reminder notices), CP504 (Notice of Intent to Levy), LT11 or Letter 1058 (Final Notice of Intent to Levy and Notice of Right to a CDP Hearing – this is the last formal notice before bank levy action), and CP90 or CP297 (Notice of Levy – confirms levy has been issued). If you have received an LT11 or Letter 1058, a bank levy can follow within days.
How to Stop the Levy in 21 Days
The only permanent way to stop an IRS bank levy is to pay the underlying tax liability in full, enter a formal installment agreement, or obtain a release due to hardship or error. For most businesses, emergency tax lien financing is the fastest solution. A specialty lender can move from application to funded loan in 10-21 days for qualified businesses, wire funds directly to the IRS, and cause the IRS to release the levy and the underlying federal tax lien within 30 days of payoff. Businesses that act within the first 48-72 hours of receiving a levy notice have the most options.
Can the IRS levy multiple bank accounts?
Yes. The IRS can serve levy notices on every bank account in your business name at every financial institution. Revenue officers monitoring active cases sometimes do exactly this.
Can I open a new bank account after a levy?
Yes. Funds deposited into a new account after the levy date are not subject to the existing levy. However, the IRS can serve a new levy on the new account at any time if the underlying liability is not resolved.
Emergency Levy Response – Apply Now
Tax Funds is a financing marketplace. IRS levy procedures sourced from IRS.gov and IRC 6332.