Most people think a bank levy comes out of nowhere. It does not. By the time a bank account is frozen, the IRS has usually mailed a stack of letters, and the law required several of them before a levy was allowed.
If you are early in that process, say an audit just ended or you just got your first balance-due notice, this page shows where you are on the road and where the off-ramps are. If you are already levied, it shows you which steps to check for mistakes.
Step 1: The tax has to be assessed
Collection starts with an assessment, which is the formal recording of a tax liability on the IRS's books. How a tax gets assessed depends on where it came from.
- Tax you reported but did not pay. The IRS assesses what you showed on your return.
- An audit adjustment. For income tax deficiencies, the IRS must first mail a notice of deficiency under IRC § 6212. Under § 6213(a), you have 90 days (150 if the notice is addressed to someone outside the United States) to petition the Tax Court, and the IRS cannot assess the deficiency, or levy to collect it, until that window closes or a Tax Court decision becomes final.
- A return the IRS prepared for you. If you did not file, the IRS can make a substitute for return under IRC § 6020(b). See substitute for return assessments and bank levies.
The audit stage is the cheapest place to win. A petition to the Tax Court before the 90 days run keeps the assessment, and therefore the levy, off the table until the case is decided.
Step 2: Notice and demand
IRC § 6303(a) requires the IRS, as soon as practicable and within 60 days after assessment, to give notice to each person liable for the unpaid tax, stating the amount and demanding payment. The notice can be left at your home or business or mailed to your last known address.
Two things happen off this notice:
- The 10-day clock in § 6331(a). The levy power only exists if you "neglect or refuse" to pay within 10 days after notice and demand.
- The federal tax lien. Under IRC § 6321, if you neglect or refuse to pay after demand, a lien arises on all of your property and rights to property. The lien is a claim, not a seizure. See bank levy vs. tax lien.
There is also a small reward for paying fast. As IRM 5.11.1.3.2 explains, under § 6601(e)(3), if the amount in the notice and demand is paid within 21 calendar days (10 business days if the amount is $100,000 or more), interest is not imposed for the period after the notice and demand on the amount paid.
Step 3: Balance-due reminders
After the first bill, the IRS typically sends more reminders. They are not all legally required, and the names vary by system, but they escalate in tone. Read them. They usually include the amount owed and how to set up a payment plan.
Step 4: Notice of intent to levy
IRC § 6331(d) is a hard rule. A levy on salary, wages, or other property may be made "only after the Secretary has notified such person in writing of his intention to make such levy." The notice must be given in person, left at your home or business, or sent by certified or registered mail to your last known address, no less than 30 days before the levy. It must also explain, in simple terms, the levy rules, your appeal rights, and alternatives like installment agreements (§ 6331(d)(4)).
The IRS says its CP504 notice is the Notice of Intent to Levy required by § 6331(d). There is one exception: § 6331(d)(3) drops the notice requirement if the IRS has made a jeopardy finding. See jeopardy levies.
Step 5: Notice of your right to a CDP hearing
This is the big one. IRC § 6330(a) says no levy may be made unless the IRS has notified you in writing of your right to a hearing, at least 30 days before the first levy for that tax period. The notice goes by personal delivery, by leaving it at your home or business, or by certified or registered mail, return receipt requested.
The ACS version is the LT11, and the field version is Letter 1058 (IRM 5.19.4.3.1). If you request a hearing in writing within 30 days, levy action for those periods is suspended while the hearing and any appeal are pending (§ 6330(e)(1)). That is the single most important deadline in IRS collection. The details are in CDP hearings to stop a bank levy and the final notice of intent to levy.
One more wrinkle: if the IRS later assesses additional tax for the same period, the IRM requires a new CDP notice before that new assessment can be included in a levy (IRM 5.11.1.3.2.1 and 5.19.4.3.1).
Step 6: Advance notice of third-party contacts
Serving a levy on your bank is a contact with a third party. IRC § 7602(c)(1) generally bars the IRS from contacting third parties about your tax unless it gave you advance written notice, at least 45 days before the contact period begins. The IRM lists this notice among the required pre-levy notices and confirms that a notice of levy to a third party is a third-party contact (IRM 5.11.1.3.2).
Step 7: The levy
Only after those steps can the IRS serve a Form 668-A on your bank. Then the 21-day hold begins. See Form 668-A explained and the 21-day hold.
Even at this stage, a revenue officer is supposed to think before levying. IRM 5.11.1.3.1 tells revenue officers that if they have verified a levy would cause economic hardship, the levy should not be issued, and that levy decisions are made case by case, weighing your responsiveness, compliance history, and efforts to pay.
The timeline at a glance
| Step | Authority | Your off-ramp |
|---|---|---|
| Notice of deficiency | § 6212, § 6213(a) | Tax Court petition within 90 days |
| Assessment and notice and demand | § 6303(a) | Pay within 21 days to limit interest; request a payment plan |
| Lien arises | § 6321 | Pay or resolve before a lien notice is filed |
| Notice of intent to levy | § 6331(d) | Installment agreement or offer, which bars levy under § 6331(k) |
| CDP notice | § 6330(a) | Request a CDP hearing within 30 days |
| Third-party contact notice | § 7602(c) | Use the time; levies may follow |
| Bank levy served | § 6331(a), § 6332(c) | Release under § 6343 during the 21-day hold |
If you already have a levy: check the sequence
When a levy arrives, I want to see the IRS account transcript and copies of the notices. Questions worth asking:
- Was a CDP notice sent for every period on the levy, to your last known address?
- Was a new CDP notice sent for any additional assessment?
- Was an installment agreement request or offer pending when the levy issued? Section 6331(k) bars levy in that window.
- Did you request a hearing that the IRS overlooked? IRM 5.11.2.2.1 tells employees to check all communication channels for a CDP request before issuing a levy.
A levy issued in violation of the law must be released, and IRM 5.11.2.4.1 says proceeds from a levy made without a § 6330 notice, or while an offer was pending in violation of § 6331(k)(1), must be returned, subject to the time limits. See getting levied funds returned.
If the audit was wrong
Collection does not always end the fight over the number. Audit reconsideration is the IRS process for reevaluating an unpaid assessment when you bring information not considered in the original exam, and it is also how you contest a substitute for return by filing an original return (IRM 4.13.1.2). And in a CDP hearing, you can challenge the underlying liability if you did not receive a notice of deficiency or otherwise have an opportunity to dispute it (§ 6330(c)(2)(B)).
Every letter on this timeline is either a deadline or an opportunity. Usually both.
If you are still at the audit stage, the firm's guide on what to do in an IRS audit is a good next read.