South Dakota Notice of Bank Levy Checklist

South Dakota Notice of Bank Levy: What It Means and

What to Do

Introduction

A South Dakota Notice of Bank Levy is a formal document from the Department of Revenue, informing you that the state has ordered your bank to freeze or transfer funds from your account to settle a business tax debt. This notice indicates that the state has moved beyond letters and payment requests and is now taking direct action to collect the outstanding amount.

South Dakota does not have a state income tax; therefore, this notice pertains to business tax obligations, including unpaid sales tax, use tax, motor fuel tax, or bank franchise tax. Failing to address this notice may result in additional penalties, loss of access to your funds, and continued collection action. Understanding what the notice says is the first step toward addressing the situation.

What This Notice Means

A bank levy is a legal order from South Dakota’s Department of Revenue that instructs your bank to set aside or transfer money from your account directly to pay a business tax debt. The

Department of Revenue issues an Order to Withhold to your financial institution as part of the statutory collection process for delinquent business taxes.

This represents one of the more direct collection tools the state uses, typically following other unsuccessful attempts at collection.

Why the State Sent This Notice

The state issues a bank levy notice when a business tax debt remains unpaid after a specific period and after other collection efforts have failed to resolve the debt. Common reasons include unpaid sales tax from a business, unpaid use tax, unpaid motor fuel tax, or unpaid bank franchise tax.

The state typically sends earlier notices demanding payment before issuing a levy. The notice itself should list the specific details of the debt that triggered the levy. If you are uncertain what tax debt this instance relates to, the notice should identify the tax type, the tax year or period, and the amount owed.

What Happens If You Ignore This Notice

If you do not respond to or address a bank levy notice, the state will proceed with the levy as written. Your bank will freeze the amount of money specified in the notice, and after the required holding period, that money will be sent to South Dakota’s Department of Revenue.

Once the state receives the funds, they will be applied to your business tax debt. If the levy does not collect enough money to pay the full debt, the state may issue additional levies against the same account or other accounts, or pursue other collection methods. The state may also continue to charge penalties and interest on any remaining unpaid balance.

Understanding Important Limitations

Receiving a bank levy notice does not mean criminal charges have been filed against you. This is a collection tool authorized under state tax law, not a criminal prosecution. The notice does not mean all of your bank accounts will be frozen automatically—the levy typically specifies the amount being seized.

South Dakota does not have self-executing bank account exemptions, which means your bank will not automatically protect exempt funds, such as Social Security benefits or other protected income. You must actively file an exemption claim with the court to protect funds that qualify for exemption under South Dakota law.

Steps to Take After Receiving This Notice

1. Step 1: Read the notice carefully and locate the following key information: the tax type, the tax

   year or reporting period, the amount of the tax debt, the amount being levied, the date the levy was issued, your bank account information or bank name, any deadline for response or appeal, and the contact information for the South Dakota Department of Revenue. Write down these details in one place.

2. Step 2: Verify the debt is actually yours by checking whether you recognize the business tax

   debt described in the notice. Look at old tax returns, payment records, or notices you may have received earlier. If you believe the notice was sent by mistake or relates to a different business entity, note the information carefully. Keep any documents that indicate the debt is inaccurate.

3. Step 3: Gather your financial records, including recent bank statements, business financial

   records, and any documents showing money coming into or going out of the account being levied. Collect any previous tax returns, payment confirmations, or correspondence with the state about this debt. Having these documents available will help if you need to discuss options with the state.

4. Step 4: Contact the South Dakota Department of Revenue using the contact information in the

   notice. Be clear and direct: tell them you have received a bank levy notice, provide your name and any reference number from the notice, and ask about the available options.

   Ask specifically whether you can arrange a payment plan instead of the levy, whether the state will delay the levy while you gather funds, what the process is for disputing the debt if you believe it is incorrect, and whether any penalty or interest can be reduced. Write down the name of anyone you speak with and the date of the call.

5. Step 5: If you believe the notice contains an error, explain the matter clearly in writing to the

   Department of Revenue. Include copies of any documents that support your position. Be specific about what you believe is incorrect. Ask for a review or appeal of the notice.

6. Step 6: Act before the levy takes effect. Levies typically take effect on a specific date mentioned

   in the notice or shortly after it is issued. Your bank holds the frozen funds for a holding period