IRS Bank Levy: What to Do in the First 21 Days

An IRS bank levy freezes the money in your account on the day the levy is received by the bank. The bank is required to hold the funds for 21 calendar days before sending them to the IRS. That 21-day window is your window to act. After day 21, the money goes to the IRS and getting it back becomes significantly harder. This page covers what triggers a levy, what the 21-day hold means, how to get the levy released, and what happens if you have accounts in Canada that the IRS wants to reach.

How does a bank levy work?

The IRS sends a Notice of Levy (Form 668-A) to your bank. The bank is legally required to comply under IRC 6332. On the day the bank receives the levy, it freezes the lesser of the balance in the account or the amount of the tax debt. New deposits that arrive after the levy date are not captured by that specific levy (though the IRS can issue additional levies).

The bank then holds the frozen funds for 21 calendar days (IRC 6332(c)). This holding period exists specifically to give the taxpayer time to resolve the matter before the money is surrendered. On day 22, the bank sends the funds to the IRS. The 21-day clock starts on the date the bank receives the levy, not the date you discover the freeze.

A bank levy is a one-time seizure: it captures what was in the account on the levy date. It is not a continuing garnishment (that is a wage levy under IRC 6331(e), which continuously takes a portion of each paycheque until the debt is paid or the levy is released). But the IRS can and does issue multiple bank levies. If the first levy does not satisfy the debt, the IRS may levy the same account again, capturing whatever new funds have been deposited.

What happened before the levy?

The IRS does not levy first and explain later. Before issuing a bank levy, the IRS is required to have taken several steps:

1. Assessed the tax and sent a Notice and Demand for Payment (the original bill).
2. The taxpayer failed to pay after the demand.
3. The IRS sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (Letter 1058 or LT11) at least 30 days before the levy, either by certified mail or in person (IRC 6331(d)).

The Final Notice is the one that matters. It tells you that a levy is coming and that you have the right to request a Collection Due Process (CDP) hearing within 30 days. If you received the Final Notice and did not act within 30 days, the IRS may proceed with the levy. If you never received the Final Notice (because it was sent to an old address, because you live abroad and mail was delayed), the levy may still be valid if the IRS sent it to your last known address on file.

For cross-border filers living in Canada, the address problem is real. If the IRS has your Canadian address on file, international mail delays can eat most or all of the 30-day response window. If the IRS still has your old US address, you may never see the notice at all.

What should I do in the first 21 days?

Act immediately. The 21 days are calendar days, including weekends and holidays, and they start when the bank receives the levy, not when you discover it.

Step 1: Call the IRS. Contact the collections officer assigned to your case. The number is on the Final Notice of Intent to Levy. If you do not have the notice, call 800-829-1040 and ask to be transferred to the Automated Collection System (ACS). Tell the representative you have a levy and need to discuss resolution.

Step 2: Determine why the levy was issued. Is it because you have unfiled returns? Unpaid assessed tax? A broken installment agreement? The path to release depends on the cause.

Step 3: Take the action that triggers a release. The IRS will release a levy if any of the following conditions are met under IRC 6343(a):

• The tax is paid in full (including penalties and interest).
• The IRS determines the levy is creating an economic hardship, meaning you cannot meet necessary living expenses (IRC 6343(a)(1)(D)). This requires submitting Form 433-A or 433-F (Collection Information Statement) showing your income, expenses, and assets. If your monthly income minus essential expenses (rent, food, medical, transportation) leaves nothing or goes negative, economic hardship is established.
• You enter into an installment agreement (IRC 6343(a)(1)(C)). If you qualify for a streamlined installment agreement (balance under $50,000, can pay within 72 months), the IRS should release the levy once the agreement is set up.
• The levy was issued before the CDP notice period expired (procedural error by the IRS).
• The collection statute of limitations has expired (IRC 6502: 10 years from assessment).
• You file all missing returns. If the levy was triggered by unfiled returns, filing them may be enough to get the levy released and move into a payment arrangement.

Step 4: Fax the resolution to the collections officer. Time matters. If you set up an installment agreement on day 15, fax the confirmation to the officer who issued the levy and ask for a formal levy release. The bank needs to receive the release from the IRS before day 21.

What is a Collection Due Process hearing?

A CDP hearing is your right to an independent review by IRS Appeals before the IRS can proceed with a levy. The right is triggered by the Final Notice of Intent to Levy. You have 30 days from the date of that notice to request a CDP hearing by filing Form 12153 (IRC 6330).

If you filed the CDP request within 30 days, the IRS must stop collection while the hearing is pending. If you missed the 30-day deadline, you can still request an “equivalent hearing” within one year, but the IRS is not required to stop collection during an equivalent hearing.

At the CDP hearing, you can raise any relevant issue: the underlying liability (if you have not previously had an opportunity to dispute it), the appropriateness of the collection action, and alternative collection methods (installment agreement, Offer in Compromise, Currently Not Collectible status). If you disagree with the Appeals officer’s determination, you can petition the US Tax Court within 30 days.

The CDP hearing is particularly valuable for cross-border filers who did not receive the Final Notice in time. If you can show that the notice was sent to an address you had already updated, or that international mail delays prevented timely response, the Appeals officer may consider this as part of the collection alternative analysis.

What about wage levies?

A wage levy (or continuous levy on wages) works differently from a bank levy. Under IRC 6331(e), a wage levy attaches to each future paycheque and continues until the debt is paid, the levy is released, or the levy expires. The employer is required to withhold the levied amount and send it to the IRS.

The amount exempt from the wage levy is calculated using the taxpayer’s filing status and number of dependents, based on the standard deduction and personal exemption amounts. The IRS provides Publication 1494 (table for computing exempt amounts) to employers. For a single taxpayer with no dependents, the exempt amount in recent years has been approximately $1,100 to $1,200 per month, meaning everything above that goes to the IRS. This is significantly less than most provincial or state garnishment protections.

The release criteria are the same as for a bank levy: pay in full, demonstrate hardship, enter into an installment agreement, or resolve the underlying issue.

Can the IRS levy my Canadian accounts?

The IRS’s direct levy authority under IRC 6331 applies to property within the United States or property of the taxpayer in the possession of US persons. A Canadian bank account held at a Canadian institution is generally outside the IRS’s direct levy power. However, two indirect paths exist.

First, if the Canadian bank has a US branch or correspondent relationship, the IRS may attempt to levy through the US-side entity. This is legally contested and fact-specific, but it has been attempted.

Second, under Article XXVIA of the Canada-US treaty, the IRS can request the CRA’s assistance in collecting a US tax debt from a person in Canada. The CRA would then use its own collection tools (Requirements to Pay, wage garnishment) to collect on the IRS’s behalf. This mutual assistance is available only for “finally determined” revenue claims, meaning the assessment must be past all administrative and judicial appeals.

In practice, treaty-based collection assistance for individual tax debts is uncommon for amounts under $100,000, but the mechanism exists and the IRS has used it. If you live in Canada and owe a large US tax debt that is past the appeal stage, the CRA can assist the IRS in collecting from your Canadian accounts.

What if the money was already sent to the IRS?

If the 21-day window has passed and the bank sent the funds, recovery requires a different path. You can file a claim for return of wrongfully levied property under IRC 6343(b) if the levy was procedurally defective (no Final Notice, levy issued during a pending CDP hearing, levy on exempt property). You can also request a refund if you later pay the tax in full or settle through an Offer in Compromise and the levied amount exceeds the settlement.

If the underlying assessment is wrong and you can demonstrate it, paying the tax (or having it taken by levy) and then filing a refund claim on Form 843 is the standard path. The statute of limitations on refund claims is the later of three years from filing or two years from payment (IRC 6511).

What should I do next?

If your account is currently frozen: call ACS today. Determine whether you are within the 21-day holding period. If yes, pursue the fastest path to levy release (installment agreement for amounts under $50,000, hardship for amounts you genuinely cannot pay). File any missing returns. Fax the resolution and request a formal levy release before day 21.

If you received a Final Notice of Intent to Levy but the levy has not yet happened: you have 30 days to request a CDP hearing on Form 12153. File it. The hearing request suspends collection. Use the hearing to propose an alternative (installment agreement, OIC, CNC). If the IRS is also garnishing your wages, the CDP hearing covers both levies.

If you owe both the IRS and the CRA, coordinate the responses. The CRA collections guide covers the Canadian side. A resolution with one agency does not automatically affect the other, and both can collect independently.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.