Kentucky Notice of Levy Checklist
What the Notice of Levy Means
The Kentucky Department of Revenue issues a Notice of Levy when you owe unpaid state taxes, and the department has decided to collect the debt by seizing funds from your bank account. This official form, known as Revenue Form 12B020, represents an advanced stage of tax collection where the state directly accesses your financial accounts rather than requesting voluntary payment.
Kentucky law requires the department to send you written notice and demand at least 10 days before issuing the levy. This document must be delivered in person or sent by certified mail to your last known address. Once your bank receives the levy order, the financial institution freezes the funds in your account and holds them for 10 days before transferring the money to the department.
Why the Department Issues Levies
The Kentucky Department of Revenue typically issues a Notice of Levy after you have not paid taxes owed and have not responded to earlier collection efforts. Unpaid income tax, sales tax, or other state tax obligations that remain unresolved for an extended period represent common reasons for this action. Specific statutory requirements govern what the department must do before collection can proceed.
Before any levy occurs, the department must provide you with written notice and a demand stating the intention to levy. This notice must arrive at least 10 days before the levy date. Collection actions escalate when taxpayers do not respond to initial billing notices or arrange payment plans within the first 60 days.
Statutory Requirements and Timeframes
Kentucky Revised Statutes Section 131.510 establishes clear requirements for levy procedures. Written notice and demand must reach you no less than 10 days before the levy date. Your bank holds the frozen funds for an additional 10 days after receiving the levy order, giving you time to contact the department and resolve the situation.
After 60 days from the initial notice of tax due, the department adds a 25% cost of collection fee to your unpaid balance. This substantial penalty increases the total amount you owe and makes early resolution significantly more cost-effective. Ignoring collection notices results in higher costs and more aggressive enforcement actions.
Protected Funds and Exemptions
Kentucky law protects certain types of income and property from levy. Protected funds include:
● Social Security benefits
● Pensions and retirement benefits
● Public assistance payments
● Court-mandated child support payments
● Alimony payments
● Worker’s compensation disability insurance
● Up to $5,000 of residential property value
Property exempt from judgment under Kentucky law is also exempt from levy. You must notify the department if your bank account contains only protected funds. The department cannot automatically identify exempt funds in your account, so you bear responsibility for claiming these protections.
Immediate Steps After Receiving Notice
Contact the Kentucky Department of Revenue immediately using the phone number listed on your notice. Explain your situation and ask whether the debt amount is correct. Request verification of the tax assessment and confirm which tax periods the debt covers.
Gather your tax records for the periods mentioned in the notice:
- Locate tax returns you filed with Kentucky for those years.
- Find proof of any payments you made to the department.
- Collect W-2 forms, 1099 forms, or business records from those periods.
- Review any previous correspondence from the department about this debt.
Contact your bank directly to confirm whether they have received the levy order. Ask when the 10-day hold period ends and when the bank will transfer funds to the department. Verify which accounts are affected and confirm the frozen amounts.
Payment Options and Arrangements
If you cannot pay the full amount immediately, ask the department about installment payment agreements. Kentucky law gives taxpayers the right to consideration of payment plans for delinquent taxes, interest, penalties, and fees. Payment plan approval depends on your financial situation and ability to pay.
The department may require you to submit a Statement of Financial Condition showing your current income and expenses. Electronic payments through e-checks may be mandatory for payment plan arrangements. Any tax refunds you receive will be offset and applied to your debt, even if you make all scheduled installment payments on time.
After 60 days from the initial notice, the department may file a Notice of State Tax Lien against your property. Liens appear in public records and can affect your ability to sell or refinance property. The department may also require electronic payment methods and will continue to offset any qualifying refunds.
Financial Hardship Considerations
If you face genuine financial hardship that prevents you from paying your debt in full, contact the Division of Collections at 502-564-4921. Financial hardship differs from financial inconvenience, and your situation must meet specific criteria to qualify for hardship consideration.
The Division of Collections operates an Offer in Settlement Program that allows the department to settle cases for less than the full amount owed. Eligibility depends on your individual circumstances and financial condition. You must demonstrate that paying the full amount would create severe economic difficulty.
What Happens If You Take No Action
Ignoring the Notice of Levy allows the collection process to proceed without interruption. Your bank will transfer the frozen funds to the Kentucky Department of Revenue after the 10-day hold period expires. If the levy does not collect the full debt amount, the department may issue additional levies against other bank accounts or pursue wage garnishment.
Additional enforcement actions may include seizure of personal property, continued levies on future bank deposits, or legal proceedings to collect the debt. The 25% collection fee increases your total debt significantly. Interest and penalties continue to accumulate on unpaid balances throughout the collection process.
Documentation and Record Keeping
Keep copies of all documents related to the levy, including the original Notice of Levy, correspondence with the department, and proof of any payments you make. Document every phone conversation with revenue department representatives by recording the date, time, name of the person you spoke with, and what was discussed.
Request written confirmation of any payment arrangements or agreements you reach with the department. Save receipts, payment confirmations, and bank statements showing the levy and any subsequent transactions. This documentation protects you if questions arise later about payments or agreements.
Received a State Tax Notice?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
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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
