Delaware Notice of Bank Levy Checklist Guide
A Delaware Notice of Bank Levy is a formal notice telling you that the Delaware Division of Revenue has instructed your bank to freeze or hold money in your account to pay unpaid Delaware state taxes. This notice is significant because it represents an advanced enforcement action, and your bank will comply with the order within a specific timeframe established by Delaware law.
Understanding what this notice states and your options can help you respond appropriately and avoid additional collection actions.
What This Notice Means
A bank levy is an order from the Delaware Division of Revenue that directs your financial institution to hold funds from your account and send them to the state to cover unpaid tax debt. The notice informs you that the state has taken this step because previous collection attempts have not resulted in payment. This is one of the more serious collection actions available to the state, and it means your bank account is now involved in the tax collection process.
It is essential to recognize that Delaware has unique laws governing the garnishment of bank accounts. While Delaware has banned private creditors from garnishing bank accounts, the state government retains the power to levy bank accounts for tax debts. This means the Delaware Division of Revenue has specific authority that private creditors do not have when it comes to collecting unpaid state taxes.
Why the State Sent This Notice
The Delaware Division of Revenue typically issues a bank levy notice after other collection methods have been attempted without success. This might include past-due tax bills, payment plan violations, or failure to respond to earlier notices. Before the Division of Revenue can take garnishment or levy action, three specific legal requirements must be met.
First, the Division must assess the tax and send you a Notice and Demand for payment. Second, you must neglect or refuse to pay the tax. Third, the Division must file a Notice of Judgment in Delaware Superior Court at least 10 days in advance of the garnishment.
An exception exists if the Division concludes that the collection of your tax is threatened or in jeopardy. For example, if a taxpayer is planning to leave the country quickly, the Division may believe that collection is threatened. Immediate collection action may be taken before all three requirements are met. If this happens, you may seek a managerial review from the Division of Revenue, and the procedures for this will be explained in the letter you receive.
What Happens If You Ignore This Notice
If you do not respond to or address a Delaware Notice of Bank Levy, your bank will proceed with the levy order according to the timeframe required by Delaware law. When the Division of Revenue attaches your bank account, your bank is required to hold funds you have on deposit, up to the amount you owe, for precisely 20 days. This 20-day period allows you time to resolve any issues regarding the garnishment or make alternative arrangements to pay.
After the 20-day period expires, the bank is required to send the money, along with any applicable penalties and interest, to the Division of Revenue. Once the levy is processed, the state will use the funds to pay your unpaid tax debt. If the levy does not collect the full amount owed, the state may pursue additional collection actions, such as wage garnishment, asset liens, or further enforcement. The longer the underlying tax debt remains unpaid, the more collection actions may accumulate.
What This Notice Does Not Mean
Receiving a Delaware Notice of Bank Levy does not mean you have lost all options or that the debt cannot be resolved. It does not automatically mean criminal charges are being filed against you. A bank levy is a civil collection tool, not a criminal action. The notice also does not mean the state will not work with you if you contact them to discuss a payment plan, penalty abatement, or other resolution.
Checklist: What to Do After Receiving This Notice
Step 1: Read the Entire Notice Carefully
Find and write down the following information from the notice: the exact amount of tax debt listed, the tax year or years the debt covers, the date the levy was issued, the deadline for any response or action on your part, the name and phone number of the Delaware Division of Revenue contact listed, the specific bank account or accounts affected, and any reference number or case number included in the notice. Do not assume you understand what the notice says after a glance. Read it word by word, even if parts are confusing.
Step 2: Understand the 20-Day Holding Period
Recognize that you have precisely 20 days from the date your bank receives the levy order to resolve the situation before your bank sends the funds to the state. This 20-day period is your window to contact the Division of Revenue, make payment arrangements, pay the debt in full, or address any disputes about the debt. After the 20 days have expired, your bank will transfer the held funds to the state, and you will lose this opportunity to stop the levy.
Step 3: Verify the Debt and Account Information
Check your own records to confirm you actually owe Delaware state taxes, the amount listed in the notice matches your understanding of what you owe, the bank account listed is one you own or control, and the tax year or years mentioned are correct. If any information seems wrong, note the specific discrepancy. Do not assume an error will fix itself.
Step 4: Gather Your Documentation
Collect and organize your most recent Delaware tax return or returns, any payment records you have (bank statements, cancelled checks, receipts showing tax payments), any past notices you received from the Delaware Division of Revenue, any correspondence with the state about this debt, any payment plan agreements you may have had with the state, and recent bank statements showing the account named in the levy. Having these documents ready will be helpful if you need to contact the state or prove payments made.
Step 5: Contact the Delaware Division of Revenue Immediately
Use the phone number or contact information listed in the notice to reach out. Be prepared to provide your name, Social Security number, and any case or reference number. Explain what you are calling about (the bank levy notice you received). Ask what specific actions the state will take and when they will be implemented. Ask about your options for resolving the debt.
Ask whether a payment plan, penalty abatement, or other arrangement is possible. Get the name and direct contact information of the person you speak with. Call during the hours listed in the notice. Keep notes about who you spoke with and what they told you.
Step 6: Ask About Current Status and Options
During your conversation with the state, find out whether the bank has already frozen the funds or if the levy is pending. How much time remains in the 20 days before the bank will transfer funds? Is a payment plan available? Is there a way to stop the levy by paying or arranging payment? What happens after the levy is processed? Do you qualify for any type of hardship consideration? What is the deadline to respond or take action? Write down the answers clearly. Request any procedures in writing, if possible.
Step 7: Explore Payment Options
Discuss with the Division of Revenue whether you can pay the full debt immediately, whether you can set up a payment plan before the levy is processed, whether filing a currently-due return (if applicable) would help your situation, and whether there are penalties or interest that could be addressed through abatement. Request any offers in writing before committing to anything. Payment arrangements made within 20 days may result in the levy being withdrawn or stopped.
Step 8: Review Your Bank Account Details
Check your bank statement or account information to confirm the exact name and number of the account the levy affects, whether you have other accounts at the same bank not listed in the levy, your current account balance, and any automatic payments or transfers set up on this account that might be affected. If the levy affects an account you share with a spouse or family member, your bank can provide information about how jointly-held accounts are treated under a levy.
Step 9: Meet Any Stated Deadlines
The notice should specify any deadlines for responding in writing, making a payment, appealing, or disputing the levy, and provide instructions on how to contact the state. Mark these deadlines on your calendar. Do not miss them, even if you are waiting to hear back from the Division of Revenue. Remember that the 20-day bank holding period is the most critical deadline to meet.
Step 10: Document All Communication
Keep a record of all phone calls (date, time, who you spoke with, what was discussed), all letters you send to the state (keep a copy for yourself), all letters or notices you receive from the state, all emails or online messages with the Division of Revenue, and any agreements or offers from the state (in writing). Store these documents in a safe place. You may need them later.
Step 11: Follow Up in Writing if Needed
If you spoke with someone by phone, consider sending a written follow-up letter that includes the date of your call, the person you spoke with, the topics discussed, your understanding of the following steps, and any agreements reached. Send this by regular mail to the address on the notice. Keep a copy for yourself. Written documentation creates a clear record of your efforts to resolve the debt.
Step 12: Monitor Your Bank Account
After receiving the notice, check your account regularly for changes. Note the date any funds are frozen or transferred. Keep screenshots or statements showing what happened. Do not assume the levy has been cancelled just because you contacted the state. Even if you reach out to resolve the debt, the levy may still be processed unless the state formally cancels it in writing within 20 days.
Step 13: Respond to Any Follow-Up Notices
If you receive additional notices from the Delaware Division of Revenue, read them immediately. Note any new deadlines. Follow the same process as you did for the original levy notice. Do not ignore follow-up correspondence. The state may issue multiple notices as part of the collection process.
Common Mistakes to Avoid
Do not ignore the notice or assume it will go away on its own without taking any action. The 20-day holding period will expire regardless of whether you respond.
Do not miss the 20-day deadline. After the 20 days expire, your bank will transfer the funds to the state, and you will lose the opportunity to negotiate or resolve the debt before the levy is completed.
Do not fail to contact the Division of Revenue during the 20 days to discuss options. This is your best opportunity to stop the levy or arrange payment.
Do not send payment or a response to the incorrect address or department, as this can cause delays. Use the contact information provided in the notice.
Do not fail to keep copies of all communication and documentation related to the levy. You may need this information for future reference or in the event of a dispute.
Frequently Asked Questions
How long does my bank hold the funds before sending them to the state?
Delaware law requires your bank to hold the funds for a minimum of 20 days. This 20-day period allows you time to resolve issues with the levy or make alternative arrangements for payment. After the 20 days expire, your bank must send the money to the Division of Revenue.
Can I stop the levy by paying part of the debt?
This depends on the state's policy and your specific situation. The Division of Revenue may stop the levy if you pay the full amount owed or if you reach an agreement, such as a payment plan, within 20 days. Call the number on the notice to discuss whether a partial payment or a plan is possible.
Will the levy affect my entire bank account or just part of it?
The levy will affect the funds in the account named in the notice, up to the amount of the debt owed. If you have more money in the account than the debt amount, only the amount owed will be held. If you have questions about how a specific account will be treated, contact your bank and the Division of Revenue.
Can I dispute the levy if I think the debt is wrong?
Yes. You can contact the Delaware Division of Revenue within 20 days to dispute the amount or the accuracy of the debt. You may need to provide documentation showing you paid the tax or that the debt is incorrect. Ask about the formal dispute process when you call the number on the notice.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance
