Tennessee Bank Levy Checklist

Tennessee Bank Levy Checklist

What a Bank Levy Means

A Tennessee bank levy is an administrative enforcement action that allows the Tennessee

Department of Revenue to collect unpaid state taxes by freezing and withdrawing funds directly from your bank account. The Commissioner of Revenue can issue levies without court approval under Tennessee Code Annotated Section 67-1-1405 after providing proper notice and demand.

Once the state issues a levy notice, your bank must hold the specified amount of money and transfer it to the Department of Revenue. Understanding what a bank levy is and how it works is essential, as ignoring the notice can result in immediate loss of access to your funds, and taking the wrong action may delay resolution or create additional problems.

Why Tennessee Issues Bank Levies

Tennessee issues a bank levy when a taxpayer has an unpaid tax debt and has not responded to earlier collection notices or payment arrangements. Before a levy is issued, the state follows a specific procedural sequence that begins with a Notice of Proposed Assessment giving you thirty days to respond.

If you do not respond, the Department will issue a Final Demand Letter providing 10 days to comply, or collection action will begin. A collection case is then created, and a collection officer attempts to contact you. If the tax liability remains unresolved, the Department sends an Intent to Levy letter that contains a specific date when levy action will commence. According to the

Tennessee Taxpayer Bill of Rights, you receive a ten-day notice before a levy on assets is enforced.

What Happens If You Ignore the Levy

Ignoring a Tennessee bank levy does not stop it from proceeding, as your bank will comply with the state’s legal order regardless of your response. The funds in your account up to the amount specified in the levy will be frozen and transferred to the Department of Revenue within the timeframe established by Tennessee procedures.

Banks in Tennessee typically have 10 days to respond to a levy by either freezing the account or paying the amount owed. If the levy does not fully satisfy the debt, additional collection

actions may follow, including potential wage garnishment, property liens, or further enforcement measures.

What a Bank Levy Does Not Mean

A Tennessee bank levy does not mean your account is permanently closed or that all your money is gone forever. The levy applies only to the specific amount identified in the notice, not necessarily your entire account balance. This administrative action is a civil tax collection procedure, not a criminal matter. Receiving a levy does not automatically mean the state will pursue criminal charges, though unpaid tax debt remains a legal obligation.

Steps to Take After Receiving a Bank Levy Notice

1. Call the bank listed in the levy notice and ask to speak with the department handling tax levies or legal holds. Verify that a levy has been received and processed, ask about the effective date and when funds will be transferred, and request the name and contact information of the person handling the levy.

2. Read the entire document from the Tennessee Department of Revenue, including all pages, and note the tax year or years involved, the amount owed, and the effective date of the levy. Identify the specific bank account or accounts targeted, and record the

Department of Revenue contact information provided in the notice.

3. Review your tax return filing records for the year or years listed in the notice and locate any prior notices you may have received about this debt. Check whether you filed a return for that tax year, determine whether you believe the amount stated is correct, and note any questions or discrepancies for later discussion with the state.

4. Collect your most recent pay stubs or income records and gather bank statements showing current account balances. Locate copies of any filed tax returns for the year in question, find records of any previous payments made toward this debt, and keep receipts or documentation of financial hardship if applicable.

5. Call the Department's main phone line and explain that you have received a bank levy notice. Provide your Social Security Number or Federal Employer Identification Number, ask to discuss the specific debt and your options, request the names of any notices previously mailed to you, and ask whether the levy can be delayed pending resolution.

6. Ask the Department of Revenue whether full payment is possible immediately and whether installment payment arrangements or payment plans are available. Tennessee offers an offer-in-compromise program that allows settlement for less than the total amount owed. Still, it requires that all returns be filed, complete financial disclosure be provided, and that the taxpayer not be in active bankruptcy.

7. The Department generally will not accept an offer if the taxpayer can pay the full amount, the liability involves collected but not remitted trust taxes, or there is a history of willful noncompliance. Ask what documentation is required to qualify for each option, and get specific instructions on how to apply if an option interests you.

8. Write down the date, time, and name of each person you speak with and record what was discussed and any commitments made. Keep copies of all written correspondence with the state or bank, save all notices and letters received, note action items and deadlines given to you, and store these records in a safe, organized location.

Common Mistakes to Avoid

Missing deadlines can deprive you of your right to challenge collection actions, so review the levy notice carefully and mark all dates on a calendar. Do not wait for the bank to contact you, as your bank will comply with the levy without notifying you in advance.

When you contact the Department of Revenue to discuss hardship relief or a payment plan, provide accurate and complete financial information, as incomplete information may delay processing or result in the denial of relief options. Follow up essential conversations with written requests or summaries to create a record of what was discussed and agreed upon.

After you resolve the debt or arrange a payment plan, contact the Department of Revenue to request a levy release and obtain written confirmation. Do not send payments to your bank or assume you can pay the bank directly to stop the levy.

Facing State Tax 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.