Delaware Bank Levy Checklist
State enforcement action in Delaware typically begins when a taxpayer has an unpaid tax debt and has not responded to previous collection notices. A bank levy is one enforcement tool the Delaware Division of Revenue may use to collect outstanding tax liabilities. This action freezes funds in a taxpayer's bank account, allowing the state to collect money directly to satisfy the debt.
Understanding what a bank levy is, how it works, and the steps that follow is essential, as ignoring enforcement notices can result in additional penalties, interest, and loss of access to your funds. A bank levy represents a serious escalation in the collection process and occurs after earlier attempts to collect have not been successful. This checklist outlines what typically happens when enforcement reaches this stage and the actions available to you.
What This Issue Means
A bank levy is a legal action that allows the Delaware Division of Revenue to take funds directly from your bank account to pay a tax debt. When the state issues a levy, it sends an official notice to your financial institution instructing the bank to freeze a portion of your account balance. The frozen funds are held for a set period, during which you have an opportunity to respond.
If no action is taken during that period, the bank transfers the frozen amount to the state to pay down your unpaid tax obligation. A bank levy differs from a wage garnishment
(which deducts money from paychecks) or a lien (which places a claim on property). A
levy directly seizes available funds.
Once a levy is in place, the account remains frozen until the debt is paid, a payment arrangement is made, or a court order is issued to stop the levy. The bank must hold the frozen funds for 20 days before transferring them to the Division of Revenue. This
20-day period is your window to take action.
Why the State Issued This or Requires This
The Delaware Division of Revenue utilizes bank levies as a collection tool when a taxpayer has an unpaid tax debt and earlier collection efforts have not yielded payment.
Typically, the state sends multiple notices before issuing a levy. These notices request payment or ask the taxpayer to contact the department to arrange a payment plan.
A levy is considered a last-resort collection action. The state is authorized to use levies under Delaware tax law as a means to enforce the collection of outstanding state income tax, sales tax, and other tax obligations when standard collection letters have not resolved the debt. Before the Division of Revenue can take garnishment action, three legal requirements must generally be met: the Division must assess the tax and send a Notice and Demand for payment, the taxpayer must neglect or refuse to pay the tax, and the Division must file a Notice of Judgment in Delaware Superior Court at least
10 days in advance of the garnishment.
However, if the Division concludes that the collection of your tax is threatened, it may take immediate collection action before all three requirements have been met. This is known as a jeopardy assessment. In such cases, you may seek managerial review from the Division of Revenue.
What Happens If This Is Ignored
If a Delaware bank levy remains unaddressed, the funds in your account will be transferred to the state after the 20-day hold period expires. This means you will lose access to that money, and your account balance may be significantly reduced. Ignoring a levy does not stop future enforcement actions.
The state may continue collection efforts through additional levies on other accounts, wage garnishment, property liens, or other legal remedies. The longer the debt remains unpaid, the more interest and penalties accumulate, increasing the total amount owed.
Each day of delay adds to your financial burden and reduces your options for resolving the situation on favorable terms.
What This Does NOT Mean
A bank levy does not mean you have lost all legal rights or that payment is the only option. It does not automatically indicate a criminal investigation. A levy is a civil collection tool, not a criminal action. The levy does not prevent you from contacting the
Delaware Division of Revenue to discuss payment options, request a hearing, or explore other remedies.
You still have the right to communicate with the state, provide documentation, and work toward a resolution. The levy is an enforcement mechanism, but it does not eliminate your ability to negotiate or contest the debt if you believe there has been an error.
Checklist: What to Do After Receiving a Delaware Bank
Levy Notice
Step 1: Locate and review the notice carefully
Find the official levy notice sent by the Delaware Division of Revenue. Read the entire notice to identify the tax debt amount, the tax year(s) involved, and any deadline dates.
Note the effective date of the levy and the 20-day hold period stated in the notice.
Please keep this notice in a safe place for future reference.
Step 2: Identify the specific tax obligation
Determine which tax type the debt relates to, such as income tax, sales tax, use tax, or other. Note the tax year(s) for which the debt is owed. Review the dollar amount listed as the outstanding balance. Check if penalties and interest are included in the total amount shown.
Step 3: Review your bank account status
Contact your bank to confirm whether an account has been frozen. Ask which account(s) are affected by the levy. Request the exact amount that has been frozen or is being held. Inquire about the timeline for transferring funds to the state if no action is taken. Note any account fees your bank may charge due to the levy.
Step 4: Gather documentation related to the debt
Collect copies of previous notices from the Delaware Division of Revenue. Locate your original tax return for the year(s) in question, if available. Find any correspondence you may have sent to the state. Gather bank statements or financial records that may be relevant. Keep records of any payments already made toward this debt.
Step 5: Contact the Delaware Division of Revenue immediately
Call the department's main phone line or the collections division number provided in the notice. Explain that you have received a bank levy notice. Provide your name, Social
Security number or tax ID, and the specific tax year(s) involved. Request the current total balance owed, including all applicable penalties and interest. Request information about your options for resolving the debt.
Step 6: Ask about payment plan options
Inquire whether the state offers installment payment agreements for your debt. Ask what the minimum monthly payment would be. Determine whether setting up a payment plan will release the frozen funds. Request written information about any payment plan offered. Determine what happens if a payment is missed.
Step 7: Make a full payment if possible
If you can pay the full amount owed, please request instructions on how to submit your payment. Inquire whether the state accepts payment by check, money order, credit card, electronic transfer, or other methods. Request a confirmation number or receipt once payment is received. Ask how long it typically takes for the state to release the bank levy after payment is received.
Step 8: Document all communications
Write down the date and time of each call you make. Record the name of the person you spoke with at the department. Note the main points discussed and any information you received. Save any written responses, emails, or documents the state sends. Keep a file with all correspondence related to the levy and debt.
Step 9: Follow up in writing if needed
Consider sending a letter or email to the department summarizing your conversation.
Include your tax identification information and the tax year(s) in question. Outline any agreement made during your phone conversation. Send the letter via certified mail to ensure a record of delivery. Keep a copy for your records.
- Ignoring the notice entirely is one of the most damaging mistakes. Many
- Missing deadlines can significantly limit your options. If the state sets a deadline
- Assuming the amount shown is final without verification is another standard error.
- Not confirming that the bank levy is released after taking action is a critical
- Making partial payments without an agreement rarely stops collection efforts.
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 10: Take action on any payment or agreement
Follow through on whatever option you selected, whether it is a payment plan or full payment. Meet any deadlines set by the state. Submit any required documentation or information promptly. If making payments, pay by the due date each month. Monitor your bank account to confirm when the levy is released.
Common Mistakes to Avoid taxpayers ignore levy notices, hoping the issue will resolve itself. This does not stop the process; the state proceeds with collecting the frozen funds. for responding to a levy or requesting a hearing, missing that deadline may result in the elimination of specific remedies. Mark all deadlines clearly on your calendar.
The amount listed on the notice may not reflect all penalties and interest. Always confirm the exact current balance with the department before making a payment. oversight. After paying, setting up a plan, or reaching an agreement, verify that your bank account has been unfrozen. Do not assume it happens automatically.
Sending a partial payment without first establishing a payment plan may not prevent the levy or stop further enforcement actions. Always confirm the terms of any arrangement in writing.
Frequently Asked Questions
How long does the bank hold funds that are frozen?
The bank must hold frozen funds for 20 days after receiving the levy notice. This period allows you time to resolve any issues regarding the garnishment or make alternative arrangements to pay. After 20 days, if no action is taken, the bank transfers the money to the Delaware Division of Revenue.
Can I access my frozen funds?
Once frozen by a levy, those funds are held and cannot be withdrawn. You may request release by contacting the Division of Revenue and making payment, establishing a payment plan, or requesting a hearing if applicable.
What if I believe the debt amount is wrong?
Contact the Delaware Division of Revenue and request clarification of how the amount was calculated. If you dispute the debt, ask about the process for filing a formal protest under Delaware Code Title 30.
Will the levy appear on my credit report?
Tax levies do not typically appear on personal credit reports. However, if the Division of
Revenue files a Notice of Judgment in Superior Court, that judgment becomes a public record. It may be discovered by lenders, which could affect your ability to obtain credit.
Can the state levy multiple accounts?
Yes, if you have multiple bank accounts, the state can issue levies on more than one account if the debt remains unpaid. Confirm with your bank whether other accounts are affected.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and are unsure how to respond, our team can help you understand your options and next steps.
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