Can the IRS Access Your Bank Account?

The Internal Revenue Service (IRS) can access funds within a personal or business bank account to satisfy a tax debt. This action represents a final step in a collection process governed by strict legal protocols. The ability of the IRS to take this step is contingent upon a series of notifications and unmet payment demands, ensuring the taxpayer has opportunities to resolve the issue.

IRS Authority to Gather Bank Information

Before the IRS can take funds, it often needs to confirm a taxpayer’s financial details. The primary tool for this investigative step is the IRS summons, a formal request for information authorized under Internal Revenue Code Section 7602. A summons is not an action to seize money but a demand for records to help the IRS locate assets to collect a liability.

This formal request can be sent directly to the taxpayer or to a third party, such as a financial institution. When a bank receives a summons, it is legally compelled to provide the requested documents, which can include account statements, deposit records, and canceled checks. This process does not require a court order.

The process often begins with a less formal Information Document Request (IDR), or Form 4564, during an audit. If a taxpayer does not respond to an IDR, the IRS may then issue a formal summons to gather the necessary financial data.

Prerequisites for an IRS Bank Levy

The IRS cannot seize funds from a bank account without first meeting several legal requirements. This sequence of events is designed to ensure taxpayers are fully aware of their debt and have ample opportunity to address it.

The process begins with the formal assessment of tax, when the IRS officially records a tax liability. Following the assessment, the agency must send a Notice and Demand for Payment. This initial bill, often a CP14 notice, details the amount of tax owed, includes any penalties and interest, and requests immediate payment.

If the taxpayer does not respond to the initial notice and subsequent reminders, the IRS will send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. This document, typically a Letter 1058 or LT11, is sent via certified mail to the taxpayer’s last known address. It serves as the final warning that the IRS intends to seize assets, including funds in a bank account, if the debt is not resolved.

This final notice informs the taxpayer of their right to request a Collection Due Process (CDP) hearing with the IRS Independent Office of Appeals. The taxpayer has 30 days from the date on the letter to submit Form 12153. Requesting a CDP hearing temporarily halts the levy action, allowing the taxpayer to formally dispute the collection and propose alternatives.

The Bank Levy Process

Once all prerequisites have been met and the 30-day window to request a hearing has passed, the IRS can proceed with a bank levy. The IRS sends a Form 668-A, Notice of Levy, directly to the taxpayer’s bank. The taxpayer does not receive a copy of this specific notice; the communication is between the IRS and the bank.

Upon receiving the Notice of Levy, the bank is legally required to freeze the funds in the taxpayer’s account. The freeze applies to the funds available in the account when the levy is received, up to the total amount of the tax debt. A bank levy is a one-time action, so deposits made after the levy is received are generally not affected.

The Internal Revenue Code mandates a 21-day holding period from the date the bank receives the levy. During this window, the funds are frozen but have not yet been sent to the IRS. This period provides the taxpayer a final opportunity to contact the IRS to resolve the debt or prove the levy will cause an immediate economic hardship. If the taxpayer takes no action, the bank is required to remit the frozen funds to the IRS.

Securing a Levy Release

Even after a bank receives a Notice of Levy and freezes an account, a taxpayer has options to secure a release. A levy release stops the seizure and unfreezes the account, though it does not eliminate the underlying tax debt. Acting quickly during the 21-day holding period is important to prevent the funds from being transferred to the IRS.

• Pay the tax debt in full, after which the IRS will issue a release once payment is confirmed.
• Enter into an Installment Agreement with the IRS by filing Form 9465, Installment Agreement Request. If the IRS approves a payment plan, it will typically release the levy.
• Submit an Offer in Compromise (OIC) on Form 656, which is an agreement to settle the tax liability for less than the full amount owed. The IRS will generally release an active levy while it considers the offer.
• Prove that the levy is causing a significant economic hardship by providing financial information on Form 433-A. If the IRS agrees that a hardship exists, it is required to release the levy.