A bank levy is a one-time levy that reaches the deposits at the time of the levy. I.R.C. § 6332(c) only requires banks to hold funds subject to levy for 21 days. So, a taxpayer or a joint account holder must act quickly to prevent the levy from being executed. The IRS may ask the bank to hold the funds longer than 21 days if another person claims ownership of the funds.

The IRS may seize a taxpayer’s bank account even if it includes exempt wages or exempt Social Security benefits.1 The IRS may even seize an account that the taxpayer does not own but from which the taxpayer has the right to withdraw funds. When this happens, account owners must act quickly to convince the IRS that they—not the taxpayer—own the funds. 

If the bank transfers the levied funds to the IRS, non-liable account holders must use the wrongful levy procedures to recoup their funds from the IRS. To do so, they must file a Form 4528 within 9 months. If you can’t secure the returns of the funds within 9 months, you should file suit before the 9-month period elapses.2

• 126 C.F.R. § 301.6334-2(b); I.R.M. 5.11.4.5.
• 2I.R.C. § 7426(a)(1); EC Term of Years Tr. v. United States, 550 U.S. 429 (2007). There may be a due process exception to the 9-month rule in some circumstances. See Scheafnocker v. Comm’r, 642 F.3d 428 (3d Cir. 2011).

The IRS may issue a continuous levy which takes 15% of a taxpayer’s Social Security check on a monthly basis.1 The IRS has decided not to levy on SSI benefits even though the law allows this. Ask for release of the levy based on economic hardship or seek Currently Not Collectible status based on hardship.2 If the tax liability is $10,000 or more, the IRS will require Form 433-A collection information statement from the taxpayer and will conduct the analysis of hardship based on its financial standards. If the taxpayer’s only income is Social Security, a collection information statement may not be required for the hardship determination.3

• 1I.R.C. § 6331(h).
• 226 C.F.R. § 301.6343-1(b)(4); I.R.M. 5.11.2.2.1.2, .4.
• 3I.R.M. 5.16.1.2.9.

Circumstances under which a levy may be released include:

• The liability is satisfied or becomes unenforceable.
• The release will facilitate collection (i.e., the property will be sold and proceeds transferred directly to the IRS).
• The taxpayer enters an installment agreement.
• The levy causes economic hardship to the taxpayer (e.g., Currently Not Collectable status).
• The fair market value of the asset exceeds the liability and release will not hinder collection.1

• 1I.R.C. § 6343(a); I.R.M. 5.11.2.2.1.