The bank holds the money for 21 days. That is the window.

How a bank levy works

The IRS serves a notice of levy on your bank. The bank must freeze the balance in your accounts at that moment, up to the amount owed. Deposits made after the levy is served are not covered by that levy, though the IRS can serve another one later.

The bank then waits 21 days before sending the money. That holding period exists so that errors can be corrected and releases can be arranged. Once the funds are sent, getting them back is much harder than stopping them from leaving.

How a wage levy works

Your employer receives the levy with a Statement of Dependents and Filing Status for you to complete, normally within three days. A small part of each paycheck is exempt, based on your filing status, the standard deduction, and the number of dependents you claim. The exempt amounts come from a table the IRS publishes each year in Publication 1494. Everything above the exempt amount goes to the IRS, every pay period, until the levy is released or the debt is paid. If you do not return the statement, your employer must calculate the exemption as married filing separately with no dependents, which is the smallest amount.

When the IRS must release a levy

Section 6343 of the Internal Revenue Code requires release when any of these is true:

• The liability is paid, or the time to collect it has expired.
• Releasing the levy will make collection easier.
• You have entered into an installment agreement, unless the agreement says otherwise.
• The levy is creating an economic hardship, meaning you cannot meet basic, reasonable living expenses.
• The value of the property is more than the debt, and releasing part of it will not hinder collection.

Hardship has to be shown with numbers: income, rent or mortgage, utilities, food, transportation, medical costs, and proof. The IRS will usually require any missing tax returns to be filed before it discusses release, so unfiled years are often the real obstacle.

If the levy was wrong

A levy can be procedurally defective: issued without the required final notice, while a timely hearing request or an offer in compromise was pending, or while you were in bankruptcy. Levied money can be returned in some of those situations, generally if a claim is made within two years. If the account held someone else's money, such as a parent's or a business partner's, that person can bring a wrongful levy claim, and the deadlines for it are short.

What happens if you wait

With a bank levy, the money leaves on day 22. With a wage levy, every payday that passes is money applied to the debt on the IRS's terms rather than yours. A release negotiated in the first week usually leaves you with a payment arrangement you can live with. After two months of levied paychecks, you are negotiating from a worse position, with rent and car payments already behind.

The Texas Comptroller can do this too

For unpaid sales tax or franchise tax, the Texas Comptroller can freeze and levy bank accounts and other assets under state law, with its own notices and its own hearing process. The rules differ from the IRS rules, and the two agencies do not coordinate. If the freeze came from the Comptroller, say so when you call.

When a lawyer matters

Speed and leverage. Someone has to reach the right IRS employee, present a release ground the IRS is required to honor, and have the financial statement and any missing returns ready. If a revenue officer is assigned, that officer can release the levy the same day when given a reason. If the account is in automated collection, it takes persistence and the right phone unit. Payroll tax cases and business accounts add risk of personal liability and should not be handled casually.