Arizona Bank Levy Checklist

Arizona Bank Levy Checklist

Introduction

State enforcement occurs when the Arizona Department of Revenue takes action to collect unpaid state tax debt. A bank levy is one enforcement tool the state uses to recover money directly from your account when other collection attempts have not resolved the debt.

Understanding how enforcement works, what triggers it, and what your options are is critical.

Ignoring enforcement notices can result in funds being frozen in your account, wage garnishment, property liens, or continued escalation of penalties and interest.

What This Issue Means

State enforcement represents formal collection action taken by AZDOR against a taxpayer with an unpaid tax debt. A bank levy is a specific enforcement tool that allows the state to contact your bank and freeze funds directly from your account to satisfy the debt.

When AZDOR issues a levy, it serves a legal order directed to your financial institution. Arizona law requires that the taxpayer also receive a copy of the Notice of Levy that confirms it has been mailed to the person against whom the tax is assessed.

Why the State Issued This or Requires This

AZDOR typically pursues enforcement when a taxpayer has an unpaid tax balance and has not responded to prior notices or payment arrangements. According to state guidance, the department must follow specific legal procedures before issuing a levy, including sending billing notices and final demand notices to taxpayers.

A levy may be initiated when you fail to make satisfactory payment arrangements with the department, fail to respond to a final demand notice, fail to keep your installment arrangement, or fail to provide financial information upon request. The state’s goal is to recover tax revenue owed to Arizona.

What Happens If This Is Ignored

If you receive an Arizona bank levy notice and take no action, your bank will freeze funds in your account immediately upon receiving the levy. Arizona law requires the bank to hold funds on deposit for twenty-one days before transferring them to AZDOR.

This twenty-one-day period gives you time to pay in full or to arrange an alternative payment plan. After the twenty-one-day hold period expires, the state will withdraw money up to the amount of the tax debt, penalties, and interest owed.

What This Does NOT Mean

A bank levy does not mean criminal charges have been filed against you. This is a civil tax collection action, not a criminal matter.

Receiving a levy notice does not automatically result in wage garnishment or property seizure.

An AZDOR collections notice does not prevent you from disputing the underlying tax debt or requesting a payment arrangement.

Checklist: What to Do After Receiving a Bank Levy Notice

1. Read the entire notice carefully and identify the tax period, liability amount, and the deadline for response or action.

2. Locate the contact information on the notice for the Department of Revenue enforcement or collections department.

3. Gather your tax records for the periods in question, including your filed returns, receipts, or documentation of any payments made.

4. Review the notice for any appeal rights, dispute options, or deadline dates listed in the document.

5. Contact AZDOR immediately using the phone number or mailing address on the notice to discuss your situation during the twenty-one-day hold period.

6. Ask the department representative whether you can request a payment plan, extension, or temporary hold on the levy while you address the debt.

7. Ask about the possibility of disputing the debt if you believe the amount is incorrect or if you have a valid reason the debt should not be enforced.

8. Request written confirmation of any arrangement, extension, or dispute process discussed with the department.

9. Do not ignore the notice or assume it will resolve on its own. Inaction will result in funds being transferred after the twenty-one-day hold period expires.

10. Keep all correspondence from AZDOR, including notices, responses, and any agreements made.

11. Follow up in writing if you make a verbal arrangement to create a record of what was discussed and agreed upon.

What Happens After This Is Completed

After you contact AZDOR, the department will typically inform you of your options, which may include paying in full, entering an installment agreement, or pursuing a dispute process. AZDOR will release a levy if you pay the tax, penalty, and interest in full.

The department may also release a levy if you provide documentation that releasing it will help collect the balance owed, or if the department determines the levy is causing severe and unjustifiable economic hardship. Partial releases may be granted based on your financial ability and willingness to resolve your tax liability.

Common Mistakes to Avoid

Ignoring the notice remains the most common error. Bank levies proceed as written. unle

Not

disputing the amount if you believe it is incorrect removes your opportunity to challenge the debt.

ss stopped by an arrangement or legal action during the twenty-one-day hold period. Missing deadlines eliminates options and allows enforcement to proceed uninterrupted. Not contacting the state before the twenty-one-day period expires prevents you from negotiating a payment plan or temporary hold.

Providing incomplete information when discussing your situation with AZDOR prevents the department from offering appropriate solutions. Not disputing the amount means you can't challenge the debt.

Frequently Asked Questions

How much time do I have before funds are transferred?

Arizona law requires your bank to hold funds for twenty-one days after receiving the levy notice.

Contact AZDOR immediately during this period to arrange payment or discuss options.

Can I stop a bank levy once it has been issued?

According to state procedures, you can request an Arizona state tax levy release during the twenty-one-day hold period if you arrange a payment plan or make a full payment. After funds are transferred, recovery becomes more difficult.

If I set up a payment plan, will the levy be stopped?

According to state guidance, a payment plan may result in a levy release if the arrangement satisfies AZDOR's collection objectives. This must be arranged during the twenty-one-day hold period.

What if I dispute the amount owed?

Contact AZDOR during the twenty-one-day hold period and explain your dispute. Provide documentation supporting your position.

Facing State Tax Enforcement Action?

If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.