How Do I Stop an IRS Bank Levy in New York?

You have 21 days from when the bank receives the levy notice to negotiate a release with the IRS, either by proving economic hardship, entering an installment agreement, or demonstrating a procedural error. During this 21-day holding period, your bank freezes the funds but does not send them to the IRS immediately. This window is your best opportunity to act. After 21 days, the bank sends the frozen amount to the IRS, and recovering those funds becomes significantly harder.

How an IRS Bank Levy Works

An IRS bank levy is a one-time seizure of the funds in your account on the date the bank processes the levy notice. Unlike a wage garnishment, which is continuous, a bank levy captures only what is in the account at that moment. However, the IRS can issue multiple levies if the first does not satisfy the debt.

Here is the typical sequence:

1. IRS sends Final Notice of Intent to Levy (Letter 1058 or LT11) at least 30 days before any levy action.
2. IRS sends levy notice to your bank (Form 668-A).
3. Bank freezes your funds for 21 days. You cannot access the frozen amount during this period.
4. After 21 days, the bank sends the frozen funds to the IRS unless you secure a release.

The IRS does not warn you when the bank levy is actually issued. Many people discover it when their debit card is declined or checks bounce.

Five Ways to Get the Levy Released

1. Prove Economic Hardship

If the levy prevents you from meeting basic living expenses, the IRS must release it. Contact the IRS or have your representative call the Collections unit with documentation showing that the seized funds are needed for rent, utilities, food, medical expenses, or other essential costs. The IRS uses its own allowable living expense standards to evaluate hardship claims.

2. Enter an Installment Agreement

Establishing a monthly payment plan with the IRS is one of the fastest ways to get a levy released. Once the IRS accepts your installment agreement (Form 9465), they are required to release active levies. Many representatives can negotiate this by phone and get the levy released within days.

3. Submit an Offer in Compromise

Filing an Offer in Compromise halts all IRS collection activity, including bank levies, while the offer is under review. This process takes longer (typically 6-12 months for a decision), but it stops the immediate seizure and may result in settling the debt for less than the full amount.

4. Request a Collection Due Process Hearing

If you received a Final Notice of Intent to Levy, you have 30 days to request a CDP hearing by filing Form 12153. This suspends levy authority during the appeal. If the bank levy was issued without proper notice, the CDP hearing can result in the levy being reversed.

5. Show the IRS Made a Procedural Error

The IRS must follow specific steps before issuing a levy. If they failed to send the required Final Notice, assessed the tax incorrectly, or the collection statute has expired, the levy can be released and funds returned. This requires a careful review of your IRS account transcripts.

What to Do in the First 24 Hours

Time is critical. When you discover a bank levy:

• Do not deposit more money into the levied account. Additional deposits may be captured by subsequent levies.
• Contact a tax professional immediately. The 21-day window is short, and the IRS moves faster when contacted by an authorized representative.
• Gather financial documents: Recent bank statements, pay stubs, rent/mortgage statements, and utility bills. These support a hardship claim.
• Check for exempt funds: Certain deposits are exempt from levy, including Social Security benefits, disability payments, and certain federal benefit payments received within the last two months.

Work with a Local Expert

Jennifer O'Neill, EA, MBA, at IRS Help Inc. in West Seneca, NY, has released IRS bank levies for New York clients for over 40 years. Her firm contacts the IRS directly, negotiates levy releases, and establishes resolution plans that prevent future seizures. BBB accredited since 1982. Call 1-800-477-4357 as soon as you discover a levy on your account.

Related Questions

Can the IRS levy my bank account without notice in New York?

The IRS is required to send a Final Notice of Intent to Levy at least 30 days before issuing a bank levy. If you did not receive this notice, the levy may be procedurally defective and subject to release. Check your mail records and IRS account transcripts carefully.

Will the IRS levy my bank account again after releasing the first one?

Yes. Releasing one bank levy does not prevent future levies. The IRS can issue additional levies until the debt is fully resolved. The only way to prevent recurring levies is to establish a resolution plan: an installment agreement, OIC, or CNC status.

Are joint bank accounts subject to IRS levy in New York?

Yes. If your name is on the account, the IRS can levy it, even if some or all of the funds belong to a non-liable joint account holder. The non-liable party can file a claim with the IRS to recover their portion of the seized funds, but this takes time.

Read more about IRS bank levies in New York and learn about IRS wage garnishment procedures. Explore all New York IRS debt relief options.