Can the IRS Take Money From Your Bank Account?

Many taxpayers are surprised to learn that the IRS has the authority to take money directly from a bank account when tax debts remain unpaid.

For individuals and businesses in Houston, Texas, an IRS bank levy can be one of the most disruptive collection actions the government can take. Understanding how bank levies work and what options are available can help you protect your finances and resolve tax debt before funds are seized.

What Is an IRS Bank Levy?

A bank levy is a legal action that allows the IRS to freeze and seize funds from a taxpayer’s bank account to satisfy unpaid tax debt.

Unlike a tax lien, which is simply a claim against property, a levy is the actual taking of assets.

The IRS may levy:

• Checking accounts
• Savings accounts
• Business accounts
• Certain investment accounts

Once the levy is issued, the financial institution is required to comply.

How Does the IRS Levy a Bank Account?

Before issuing a levy, the IRS generally follows several steps:

Assessment of Tax Debt

The IRS determines the amount owed.

Collection Notices

The taxpayer receives notices requesting payment.

Final Notice of Intent to Levy

The IRS must generally provide advance notice before taking funds.

Levy Issued

If the matter remains unresolved, the IRS may direct a bank to freeze available funds.

What Happens After My Account Is Frozen?

When a bank receives a levy, the institution generally freezes the funds currently available in the account.

The bank typically holds those funds for approximately 21 days before sending them to the IRS.

This period provides taxpayers an opportunity to resolve the issue before the money is transferred.

Can the IRS Take All the Money in My Account?

The IRS may take up to the amount owed, limited by the funds available when the levy is received.

For example:

• If you owe $25,000 and have $5,000 in the account, the IRS may seize the $5,000.
• If you owe $5,000 and have $25,000 in the account, the IRS may generally take only the amount owed.

Future deposits are typically not affected by a one-time bank levy, although additional levies may be issued later.

Can Business Bank Accounts Be Levied?

Yes.

For Houston business owners, IRS levies can be particularly damaging because they may affect:

• Payroll operations
• Vendor payments
• Daily business expenses
• Cash flow

Addressing IRS notices early can help prevent business disruptions.

How Can You Stop a Bank Levy?

Depending on your circumstances, several solutions may be available.

Installment Agreement

Entering into a payment plan may stop collection actions.

Offer in Compromise

Certain taxpayers may qualify to settle their tax debt for less than the full amount owed.

Currently Not Collectible Status

Taxpayers experiencing financial hardship may qualify for temporary collection relief.

Collection Appeals

In some situations, taxpayers can challenge collection actions through the IRS appeals process.

What Should You Do If You Receive a Levy Notice?

Time is critical.

If you receive a Final Notice of Intent to Levy, consider:

• Reviewing all IRS correspondence immediately
• Gathering financial documents
• Verifying the amount owed
• Contacting a tax professional
• Exploring available resolution options

Taking action before the levy occurs usually provides the greatest flexibility.

Final Thoughts

An IRS bank levy can create significant financial stress for individuals and businesses alike. Fortunately, taxpayers have rights and several options may be available to stop collection actions and resolve outstanding tax debt.

If you have received an IRS levy notice or are concerned about collection activity, contact Petry Advisory at (713) 859-8000. We help taxpayers throughout Houston, Texas navigate IRS collections, resolve back taxes, and protect their financial future.

References

Internal Revenue Service (IRS). Levies. https://www.irs.gov/businesses/small-businesses-self-employed/levy

Internal Revenue Service (IRS). Collection Process. https://www.irs.gov

Taxpayer Advocate Service. IRS Collection Actions. https://www.taxpayeradvocate.irs.gov