Can the IRS Take Money From My Bank Account Without Notice?

Understanding IRS bank levies

The IRS has the legal right to seize your property to settle tax debts. A “bank levy” refers specifically to the process of taking money from your financial accounts to settle a tax debt. But the IRS can issue a levy and seize a variety of assets, which can include:

• Money from your bank accounts
• Money from retirement accounts (in some cases)
• Money from other financial accounts
• Money from your wages before they hit your accounts
• Money from a pending tax refund
• Social Security benefits
• Real estate
• Vehicles
• Other personal property

In the case of a bank levy, funds in your account will usually be frozen before the IRS actually seizes them, so you may not have access to your funds even while the IRS is in the process of issuing a bank levy.

» MORE: What is a tax lien?

The IRS notice process

In the case of a bank levy, the IRS issues letters and notices following a strict process to inform you about the actions it plans to take and to give you time to pay off the debt.

1. Notice and Demand for Payment: The IRS sends you a Notice and Demand for Payment for the tax debt. The notice will include a due date by which you either need to pay the debt or agree to an IRS-approved payment plan.
2. Final Notice of Intent to Levy: If you fail to pay the debt or fail to make arrangements to pay it, the IRS will send you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. The IRS usually sends this via mail to let you know that it has placed a levy on your bank account. It will detail the account in question.
3. Waiting period: A 21-day waiting period gives you time to settle the debt or schedule a hearing if you believe the levy was an error. During that waiting period, the money in your account will be frozen, and you won’t have access to it. Additional money placed into the account during the waiting period usually isn’t frozen.
4. Collection of funds: At the end of the 21-day period, the IRS will remove funds from your account to satisfy your tax debt.

The Final Notice of Intent to Levy is arguably the most important notice. When 21 days pass from the day you receive this notice, the IRS will take money from the account in question to satisfy your debts. After this point, you’ll no longer be able to make arrangements for a payment plan or use other assets to pay the debt.

Exceptions to the notice requirement

Under normal circumstances, the IRS is not allowed to remove money from any of your accounts without notice. You’ll always receive at least one initial notice requesting payment of your tax debt, as well as a Final Notice of Intent to Levy.

However, there are exceptions, including “jeopardy assessments.” When the IRS makes a jeopardy assessment, it has reason to believe that the standard process would result in nonpayment.

While the IRS usually cannot remove money without notice, it can and will cut off your access to it before you officially receive that final notice.

After a jeopardy assessment, the IRS can seize assets without warning and send notices after the fact. Though rare, the IRS can collect money from your accounts without notice if it believes:

• You may flee the country to escape the debt.
• You might sell assets to avoid paying your tax debt.
• You intend to make your assets inaccessible to the government.
• The seizure includes cash.

While these situations are rare, it’s important to note that the IRS will freeze your assets at the same time it initiates a standard levy. By the time you receive the notification, you may not have access to the money in the levied account.

How to stop or prevent a bank levy

The easiest way to prevent a bank levy is to pay any taxes due or make arrangements to pay via a payment plan with the IRS. Provided you pay income taxes, you never have to worry about a bank levy. Note that paying your taxes by April 15 is required to avoid levies, even if you file for an extension. An extension extends your time to file but not your time to pay taxes.

If you don’t pay your taxes by April 15, you can still avoid a bank levy if:

• You pay when you receive a Notice and Demand for Payment from the IRS.
• You pay or make arrangements to pay within 21 days of receiving a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
• You contact the IRS to report a mistake that led to the notice.
• You schedule a hearing to dispute the claim.
• You take advantage of tax relief programs.
• Paying your debt would lead to financial hardship, and you receive an offer in compromise with the IRS.

Regardless of which route you go, make sure you contact the IRS quickly to find a resolution. Doing so will give you the best chance at avoiding a levy, frozen assets and potential financial hardship.

» CONSIDER: Pros and cons of IRS payment plans

What happens during a bank levy

If you’re unable to avoid a bank levy, knowing what to expect throughout the process can help reduce stress and avoid further financial hardship.

When you receive a Final Notice of Intent to Levy, the assets the IRS is levying will be frozen. For bank accounts and other financial accounts, you won’t have access to the funds inside. This freeze occurs at the same time the IRS sends the notice, so by the time you receive it, the account will already be frozen.

The freeze will remain active for 21 days before the IRS removes the money. In that time, you can lift the freeze and remove the levy if you make other arrangements to pay your tax debts. Unless you do, you won’t have access to the funds. Any new funds you place in the account usually won’t be included in the initial freeze, but they’re subject to additional bank levies.