Indiana Bank Levy Checklist
Introduction
The Indiana Department of Revenue may issue a Bank Levy when state taxes remain unpaid after prior collection attempts fail. This enforcement action allows the state to freeze funds in a
Bank Account to satisfy an outstanding tax debt.
A Bank Levy can disrupt access to money needed for daily expenses or business operations.
Understanding how a tax levy works, what steps follow, and how to respond helps limit further collection action and financial hardship.
What This Issue Means
A Bank Levy is a legal action used by the Indiana Department of Revenue to temporarily freeze funds held in a taxpayer’s Bank Account. The state determines that available funds can be applied toward an unpaid tax liability.
Under Indiana Collection Laws, the bank must place a 60-day hold on the funds once it receives the levy. If the issue is not resolved within that period, the frozen amount is released to the state to reduce the debt amount.
Why the State Issued This or Requires This
The Indiana Department of Revenue typically issues a Bank Levy after sending a demand notice or Final Notice of Intent to Levy that remains unresolved. This action is part of the state’s debt collection process for back taxes.
The state may identify bank information through prior filings, Form 1099-INT, or routine administrative procedures. A tax levy is generally used when other collection actions have not resulted in payment or an installment agreement.
What Happens If This Is Ignored
If the levy is ignored, the bank must continue holding funds for the required 60-day period. After that time, the funds are transferred to the state to satisfy the tax debt.
If the levy does not fully resolve the balance, additional collection action may follow. This can include DOR tax liens, further levies, or referral to other enforcement tools allowed under
Indiana law.
What This Does Not Mean
A Bank Levy does not mean a court judgment has been entered or that criminal charges apply.
It is a civil debt collection measure used for state taxes.
The levy does not automatically close the Bank Account or seize exempt income. Certain funds, including some Retirement Accounts or protected benefits, may not be subject to levy if properly documented.
Checklist: What to Do After Receiving a Bank Levy Notice
Step 1: Review the levy notice details
Locate the Notice of Intent to Levy or levy notice issued by the Indiana Department of Revenue.
Confirm the Bill date, tax year, and stated tax liability.
Step 2: Confirm the affected Bank Account
Verify that the Bank Account listed belongs to you and note the amount frozen. Document any discrepancies related to ownership or account access.
Step 3: Contact the bank immediately
Call the bank’s legal or compliance department to confirm receipt of the Bank Levy. Ask for written confirmation of the 60-day holding period.
Step 4: Gather tax and payment records
Collect prior notices, filed returns, and proof of payments related to the tax debt. Organize records to clearly show how the balance developed.
Step 5: Assess financial impact
Determine which expenses are affected by the frozen funds, including rent, payroll, or utilities.
Document any financial hardship caused by the levy.
Step 6: Contact the Indiana Department of Revenue
Speak with a collections representative to confirm the debt amount and reason for the levy. Ask whether there are any errors or if the balance has changed.
Step 7: Request a detailed account statement
Ask for written documentation showing how the tax liability was calculated. Confirm whether penalties, interest, or tax warrant amounts are included.
Step 8: Ask about resolution options
Inquire about an installment agreement or other payment options available for the balance. Ask what documentation is required to proceed.
Step 9: Determine if a dispute applies
If the levy appears incorrect, ask about dispute procedures or administrative review options.
Note deadlines tied to Indiana Court or agency rules.
Step 10: Submit follow-up communication
Send written correspondence summarizing your position and requests. Keep copies for your records in case further Proceedings occur.
Step 11: Monitor levy status
Track whether the levy is released, reduced, or proceeds after the holding period. Follow up promptly if no response is received.
- 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 12: Seek professional assistance if needed
Consult a qualified tax professional or civil legal assistance provider if options are unclear.
Organizations such as Indiana Legal Services may offer guidance.
What Happens After This Is Completed
Once the Indiana Department of Revenue processes payments or agreements, it may instruct the bank to release or reduce the levy. Funds not transferred to the state are typically restored to the Bank Account.
If no action is taken, the levy proceeds automatically after 60 days. The state may continue debt collection for any remaining balance through additional enforcement actions.
Common Mistakes to Avoid
A common mistake is ignoring the levy notice and missing the 60-day window to respond, which results in automatic release of funds to the state. Another frequent issue is addressing the levy without resolving the underlying tax liability, which can lead to repeated collection actions.
Frequently Asked Questions
How long does a Bank Levy last?
Indiana law requires a 60-day holding period once the bank receives the levy. After that period, funds are released to the state if the levy is not resolved.
Will a Bank Levy appear on a credit report?
A Bank Levy itself is not reported to credit bureaus. However, missed payments caused by frozen funds may indirectly affect credit.
Can a Bank Levy be stopped once issued?
In some cases, paying the balance or entering an installment agreement may lead to release.
The Indiana Department of Revenue must authorize any change.
What if the levy was issued in error?
Contact the Indiana Department of Revenue immediately with documentation showing the mistake. Also, notify the bank so that the issue is adequately documented.
Can joint Bank Accounts be levied?
Indiana guidance does not clearly define the treatment of joint accounts. Both the state and the bank should be contacted to clarify ownership rights.
Are any funds exempt from a Bank Levy?
Certain protected funds may be exempt if properly documented. Proof of exempt income must be submitted promptly to the state.
Is a Bank Levy the same as an IRS bank levy?
An IRS bank levy is a federal action, while this levy involves state taxes. Different rules and procedures apply.
Closing
A Bank Levy issued by the Indiana Department of Revenue is a serious but time-limited collection action. It reflects unresolved tax liability rather than a court judgment or permanent seizure.
Responding quickly, documenting all communication, and addressing the underlying tax debt can reduce financial disruption. Staying informed and proactive provides the best opportunity to resolve the issue and prevent future enforcement actions.
Facing State 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.
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