Wage Levy vs Bank Levy Checklist
Understanding Wage Levies and Bank Levies
A wage levy directs your employer to send part of your paycheck to the IRS and continues until the tax debt is paid or released. When the IRS issues a bank levy, it freezes funds in your account on the date the levy is served, with the bank holding those funds for 21 days before transferring them to the IRS. The IRS can issue multiple bank levies on the same account for the same debt, as there is no legal limit on how many times your account can be levied.
These two enforcement tools operate under different timelines and have distinct stopping points.
Understanding each type matters when you receive collection notices. Your response strategy depends entirely on which levy type you face and when you act.
Taxpayers Who Need This Information
This reference applies to you if you have received a Final Notice of Intent to Levy, such as Letter
LT11, Letter L-1058, CP90, or CP297. You need this information if you are currently experiencing a wage levy or bank levy on an active federal tax debt. Business owners facing potential levies on business bank accounts require this guidance.
You should read this if your employer or bank has notified you that the IRS has served a levy on your wages or account. State tax levies follow different rules and fall outside this reference.
Levies on retirement accounts have separate protections not covered here.
Critical Timing and Documentation
You have 30 days from the notice date printed on your Final Notice of Intent to Levy to request a
Collection Due Process hearing. Missing this 30-day deadline closes your right to a CDP hearing with Tax Court appeal rights, but you can request an Equivalent Hearing within one year of the notice date.
An Equivalent Hearing provides a similar review without judicial appeal rights. The IRS serves the actual levy on your employer or bank using Form 668-W for wage levies or Form 668-A for bank levies.
Form 668-A is the levy instrument itself served on third parties, not the pre-levy notice that
triggers your CDP rights. Confusing these forms causes taxpayers to miss critical deadlines and lose appeal opportunities.
Steps to Take When Facing a Levy
1. Confirm you have received a Final Notice of Intent to Levy by checking for Letter LT11,
Letter L-1058, CP90, or CP297 from the IRS.
2. Identify which type of levy the IRS is threatening or has already served by reviewing the notice language or contacting your employer or bank directly.
3. Calculate the deadline for requesting a Collection Due Process hearing by looking at the notice date printed on your Final Notice, not the date you received it.
4. Contact your employer's HR or payroll department and your bank to determine whether
Form 668-W or Form 668-A has been served on them.
5. Review the Final Notice for the amount owed, tax years affected, and IRS contact information to verify the debt is actually yours.
6. Request a Collection Due Process hearing within 30 days of the notice date by sending a written request to the IRS address shown on the notice.
7. Gather documentation of your current financial situation, including income, expenses, and any hardship evidence for presentation at the CDP hearing.
8. Contact the IRS Revenue Officer or Automated Collection System unit handling your case in writing by certified mail to document your hearing request.
What Happens During Active Levies
Wage levies apply to each paycheck going forward from the date your employer receives Form
668-W. Your employer must comply with the levy by withholding funds based on exempt amounts calculated from your filing status and dependents.
The levy continues on every paycheck until you resolve the debt, negotiate a payment plan, or the IRS releases the levy. Knowing your payroll cycle helps you calculate how much income will
be affected before you can negotiate relief. Banks freeze accounts immediately when they receive Form 668-A from the IRS.
Frozen funds must be held for 21 days before transfer to the IRS. During these 21 days, you can negotiate with the IRS to request a levy release or arrange a payment plan. Additional separate levies on the same bank account can be issued in the future because no legal limit exists on levy repetition.
Payment Plans and Levy Release
Under IRC Section 6343, the IRS must release a levy if you enter into an installment agreement, unless the agreement specifically states the levy will not be released. Most installment agreements result in levy release, but the IRS has discretion to include terms allowing levies to continue.
Releasing the levy does not cancel the debt but stops this specific enforcement action and may allow you to negotiate alternative payment arrangements. Voluntary partial payments do not automatically release an active levy because the IRS continues the levy until a formal agreement is in place. The debt remains, and the IRS will pursue other collection methods if you do not follow through on agreed payment terms.
Common Errors That Harm Your Position
- Waiting to act after Form 668-W or Form 668-A has already been served on your
employer or bank reduces your negotiation options significantly.
- Ignoring the Final Notice of Intent to Levy because you assume the levy will not actually
happen eliminates your opportunity to request a CDP hearing.
- Confusing levy release with debt forgiveness leads to surprise when the IRS pursues
other collection methods after stopping one levy.
- Providing incomplete financial information to the IRS during negotiations may result in
the IRS discovering additional levy sources you have not disclosed.
- Assuming that one payment toward the debt automatically stops an active levy creates
false expectations because formal agreements are required.
When Professional Assistance Becomes Necessary
Seek immediate professional guidance if you have fewer than 15 days remaining until your
30-day CDP hearing deadline expires. Multiple levies served on different income sources or accounts in a short period suggest escalating collection action requiring expert intervention.
Business owners facing bank levies on operating accounts that freeze payroll or vendor payment funds need professional help immediately. Denied CDP hearing requests or hearing officers who order levies to remain in place warrant professional representation to understand appeal rights and next steps. Complex financial situations with debts exceeding $25,000 benefit from professional guidance throughout the collection process.
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