Taxation & Estate Planning

IRS levy on my bank account: When can I use it again?

By howardlevy

My response to a reader’s question about what happens to your bank account after the IRS hits it with a levy.

The IRS has levied my bank account and there was not enough funds to cover the total levy. Will the IRS levy all future deposits until it is satisfied or can I continue to deposit and pay my bills? Thank you, Jerry.

An IRS bank levy attaches only to funds in your account at the time your bank processes the levy. Any future deposits that you make are not subject to the levy once it has been processed.

For example, if you have $200 in your account at the time of levy, your bank will deduct that.  If you make a $1,000 deposit the next day, that money is yours and is not subject to the levy – you keep it. The levy was extinguished when the $200 was deducted.

An IRS bank levy is not continuous on your account.

After the levy is processed, you can continue to use the account and pay your bills.  The IRS would have to send a brand new levy to get money out of your account again.  This is certainly possible, but my experience is that another bank levy is unlikely to happen in rapid fire succession, but caution should be exercised.  Your account is clearly active in the IRS collection queue, and you may also be at risk for a levy on wages.

You should also know that an IRS bank levy requires your bank to hold the levied funds for 20 days before sending it to the IRS. This gives you a window of time to contact the IRS, negotiate a release of the levy and have the funds restored to your account.

If you have been hit with a bank account levy, the IRS is trying to get your attention.   The IRS resorts to enforcement when they cannot get account resolution voluntarily.  What to do next depends on many factors, including the age of your account, your need to recover the funds, and your ability (or inability) to repay the debt.

Full post as published by IRS and the Law on July 31, 2010 (boomark / email).