Essential Guide to the North Dakota Bank Levy

A bank levy is one of the strongest collection tools the North Dakota Office of State Tax Commissioner can use when someone owes unpaid taxes. This action allows the state to legally withdraw funds directly from a taxpayer’s bank account to cover outstanding debt. The sudden freeze on accounts can cause immediate economic hardship for individuals or businesses, making understanding how this process works essential.

Unlike federal government levies, which follow federal law, North Dakota bank levies are governed by the state’s laws and procedures. These rules detail when a levy can be issued, what types of funds are exempt, and taxpayers' rights during the process. Knowing the state’s laws and protections can help taxpayers act quickly to protect essential items and basic needs.

This guide explains the entire levy process in North Dakota, from the legal authority that allows collection actions to the steps taxpayers can take to stop or reverse a levy. It covers types of taxes that may trigger a levy, how much money can be seized, and special situations such as joint or business accounts. By the end, readers will know what to expect and how to respond if they ever face this severe tax collection.

What Is a Bank Levy in North Dakota?

A bank levy is a legal action that allows the state to take money directly from a taxpayer’s account to cover unpaid debt. This process is often used in North Dakota when tax debt remains unresolved after multiple collection attempts. Once the levy is issued, financial institutions such as banks or credit unions are legally required to freeze and withdraw funds up to the amount owed.

One crucial difference between a state levy and a federal levy is the authority that governs them. A federal levy is enforced under federal law and can apply nationwide, while a North Dakota bank levy is carried out under the state’s rules and procedures. The state follows specific timelines and notice requirements before funds can be seized, meaning account holders receive warnings before their money is taken.

Levies are not limited to just one type of account. North Dakota can collect money from checking accounts, savings accounts, certificates of deposit, and, in some cases, business accounts. Individuals and companies can be affected if they fail to pay their state tax obligations. Understanding how bank levies work under the state’s laws helps taxpayers prepare and know what steps may be available to protect exempt income, such as Social Security benefits or other protected funds.

Legal Authority and Governing Agencies

The authority for North Dakota bank levies comes directly from state law. The North Dakota Century Code Section 57-45-13 outlines supplemental proceedings that allow the state to collect unpaid taxes through property seizure, wage garnishment, and bank levies. In addition, Chapter 32-09.1 establishes the rules for garnishment, which include requirements for court orders, notices, and exemptions that protect certain funds from being taken. These statutes form the legal foundation for how levies are carried out in the state.

The North Dakota Office of State Tax Commissioner enforces the levy process. This office can assess taxes, issue demands for payment, and initiate collection actions when unpaid taxes remain. If taxpayers do not respond, the office can escalate the matter by working with sheriffs or pursuing a court judgment to collect money owed.

County sheriffs also play a significant role in the levy process. Once the Tax Commissioner certifies a delinquent account, the sheriff may be instructed to collect the debt. This can involve delivering a garnishment summons to financial institutions or seizing personal property if necessary. These government agencies ensure that collection actions are legally carried out and that creditors typically follow the procedures outlined in the North Dakota Century Code.

When Does a Bank Levy Happen?

A bank levy does not happen immediately after a tax bill goes unpaid. In North Dakota, the process begins once a tax assessment has been issued and certified by the Office of State Tax Commissioner. If the tax remains unpaid, it becomes delinquent, and the agency is legally required to notify the taxpayer. At least ten days must pass after this notice before the debt can be referred to the sheriff for collection.

The state follows a step-by-step timeline that gives taxpayers multiple opportunities to act before executing a levy. The progression usually begins with an initial demand for payment sent by mail, followed by additional letters or phone calls. If the debt remains unpaid, the state may issue a final notice warning that levy action will be taken. If there is no response, the matter is certified to the sheriff for enforcement.

Common triggers for a bank levy include ignoring written notices, failing to respond to a court order, or having a tax lien filed against personal property. Once the levy process has started, account holders risk having their funds frozen and withdrawn until the outstanding debt is fully paid. Acting quickly after receiving any notice is the best way to avoid a levy and prevent more serious collection actions.

Types of Taxes Subject to Levy

Not all unpaid taxes in North Dakota are handled similarly, but many types of obligations can lead to a bank levy. When state taxes remain unpaid, the Office of State Tax Commissioner can collect money from a taxpayer’s account until the debt is resolved. Both individuals and businesses may be affected.

The following taxes are commonly subject to levy in North Dakota:

• Individual income tax: Levies can be used to collect the unpaid state income taxes residents owe.
• Corporate income tax: Businesses that fail to file or pay corporate income taxes risk levy actions against their accounts.
• Sales and use tax: Retailers and service providers who do not remit collected sales tax may face levies.
• Withholding tax: Employers who fail to forward withheld employee taxes to the state can have their business accounts levied.
• Motor fuel and special fuel taxes: Taxes on gasoline, diesel, and other fuels are enforceable through levy actions.
• Other state-imposed taxes and fees: Depending on circumstances, additional obligations such as excise taxes or license-related fees can also be collected through levies.

Because many types of state tax obligations fall within levy authority, taxpayers should remain aware that even routine business or personal taxes can trigger this action if they remain unpaid.

Step-by-Step North Dakota Bank Levy Process

The levy process in North Dakota unfolds in several stages, each with specific requirements. Understanding these steps helps taxpayers know when they might still have time to resolve their debt before money is removed from their accounts.

1. Pre-Levy Procedures
   Before a levy can occur, the state must officially assess the tax debt and certify it is due. The Office of State Tax Commissioner then sends a written demand for payment. If the debt remains unpaid, the taxpayer receives a ten-day notice that the account will be referred to the sheriff for collection.
2. Garnishment Summons Preparation
   If the collection moves forward, the state prepares a garnishment summons. In many cases, a court judgment is required before this step, and the debtor must be notified at least ten days in advance. The summons includes information about the judgment, the amount owed, and instructions for the bank.
3. Service at the Bank
   A sheriff or a registered process server personally delivers the garnishment summons to the financial institution. Once served, the bank must freeze the taxpayer’s accounts up to the specified amount. The taxpayer must also receive copies of the documents within ten days of service on the bank.
4. Bank Compliance and Disclosure
   After receiving the summons, the bank is legally required to respond. Within twenty days, it must provide a written disclosure of the debtor’s accounts and retain the funds up to the retention amount. The creditor pays the bank a disclosure fee, and the bank continues to hold the money until the levy expires or the court issues further instructions.
5. Fund Release or Contest
   The final step is the release or contest of funds. If no objections are filed, the court issues a writ of execution that allows the bank to turn the money over to the state. If the taxpayer claims exemptions or raises objections, a court hearing is scheduled to decide the matter. Funds proven exempt or protected by law cannot be released to the state.

The North Dakota Taxpayer Access Point (ND TAP) is a vital resource for taxpayers who want to stay ahead of the process. It allows individuals and businesses to file returns, make payments, and monitor their accounts online, reducing levy risk. 

How Much Can Be Seized?

The amount that can be taken through a North Dakota bank levy depends on the size of the tax debt, court-approved costs, and any legal exemptions. The levy process aims to collect sufficient money to satisfy the outstanding debt while protecting certain types of income from seizure.

• Maximum seizure amounts: Under North Dakota law, the retention amount equals the total unpaid judgment plus $125 in fees and nine months of interest. The bank is not required to disclose or hold amounts above this limit. This formula ensures that only what is legally owed is frozen and collected.
• Minimum thresholds: Levies cannot be issued for tiny amounts. If the amount to be retained is less than $10, the bank does not hold the funds, although it must still respond to the levy notice. In addition, no judgment may be entered against a bank if the debt is less than $40, excluding costs.
• Exempt funds: Certain income is protected from levy under state and federal law. Social Security, veterans', and Supplemental Security Income are generally exempt. Child support payments and some types of exempt income also cannot be taken. These protections ensure taxpayers can still cover essential items and basic needs even during collection actions.

Stopping or Reversing a Levy

Even after a levy has been issued, North Dakota taxpayers can prevent money from being taken or recover frozen funds. Acting quickly is essential since waiting too long may limit the relief available.

• Preventing a levy: The most effective way to stop a levy is to pay the tax debt in full before funds are seized. If that is not possible, taxpayers can request a payment plan with the Office of the State Tax Commissioner. 

In some cases, demonstrating financial hardship may delay or prevent levy action. Open communication with the collections office often provides more options than ignoring notices.

• After a levy begins: Taxpayers can still file exemption claims once accounts have been frozen. These must be submitted within twenty days and include supporting documents such as a financial statement or proof of exempt funds. 

A court hearing may be required to confirm the claim. Taxpayers can also seek to reverse a levy by showing that it was issued in error or that exempt income, such as a Social Security benefit, was wrongfully taken.

Special Situations Taxpayers Should Know

While most levies follow a standard process, certain circumstances can change how the rules apply. These situations often involve additional legal steps or protections that taxpayers should understand.

• Joint accounts: When an account has more than one holder, such as spouses, only the debtor’s portion is subject to levy. The other account holders may need to file a spousal affidavit or present evidence in court to show which funds belong to them. Without this proof, the entire account may remain frozen until the issue is resolved.
• Business accounts: Companies with unpaid taxes, especially sales and withholding taxes, risk having their business accounts levied. If business and personal funds are commingled, all funds in the account may be subject to seizure. Maintaining proper records and separating accounts is the best way to protect business operations.
• Multiple bank relationships: Taxpayers with accounts in more than one bank may face levies at several institutions. The Office of State Tax Commissioner can continue serving levies until the full balance is collected, and financial institutions are legally required to comply.
• Out-of-state accounts: Accounts located outside North Dakota may still be subject to levy. Additional legal steps, such as interstate enforcement or cooperation between government agencies, may be required. The federal government may also collect money through the Treasury Offset Program, which can capture federal payments like tax refunds regardless of where the account is located.

How Long a Levy Lasts in North Dakota

A bank levy in North Dakota does not last forever. State law sets time limits to ensure that levies are not left open indefinitely, while giving the state enough time to collect money from a taxpayer’s account.

• Standard levy duration: A garnishment summons is valid for up to 360 days from the served date. Once that period ends, the levy automatically expires, and the bank must release any remaining funds to the account holder unless a new order is issued.
• Continuing wage liens: The law allows a continuing lien of up to 270 days for wage garnishments. During this period, a portion of wages may be withheld from each paycheck until the judgment amount is satisfied. Employers must legally comply with the order until it expires or the debt is fully paid.
• Renewal and re-levy procedures: The Office of State Tax Commissioner may initiate new proceedings if the debt remains unpaid after the levy expires. Each renewal requires notice and compliance with state procedures. Factors such as the size of the debt, the taxpayer’s cooperation, and court approval can affect how long levy actions continue.

Consequences of Ignoring a Levy

Failing to respond to levy notices can create immediate and long-term problems. Once a bank levy is served, money in affected accounts may be frozen without further warning. This can disrupt everyday expenses and lead to severe financial hardship if no action is taken.

• Immediate financial impact: Frozen accounts mean checks may bounce, automatic payments may fail, and bank fees may accumulate. Account holders often cannot withdraw funds needed for essential items such as rent, food, or medical care.
• Expanded collection actions: The Office of State Tax Commissioner may pursue other collection actions if the levy does not satisfy the debt. These include wage garnishment, seizure of personal property, or filing liens. In some cases, court judgments and additional orders may follow.
• Accumulating costs and penalties: Interest, legal fees, and sheriff’s costs continue to add up until the outstanding debt is fully paid. Even if the original debt was small, these extra charges can make it much more expensive to resolve later.
• Long-term effects: Tax liens and levy actions become part of the public record, damaging credit scores and affecting professional or business licenses. Future tax refunds may also be seized. Ignoring notices does not stop the process; it only makes the situation harder to fix.

Action Plan and Resources for Taxpayers

When faced with a levy notice, taxpayers should act quickly to protect their rights and limit financial damage. Taking immediate steps can prevent further collection actions and help create a path toward resolution.

1. Immediate steps (first 48 hours): Taxpayers should gather all notices, bank statements, and other documents related to the levy. Contacting the Office of State Tax Commissioner immediately is essential since early communication often leads to solutions such as payment plans or temporary relief.
2. Short-term responses (first 1–2 weeks): If taxpayers believe exempt funds, such as Social Security or veterans’ benefits, were frozen, they can file exemption claims within twenty days. At the same time, it is wise to request a payment plan or negotiate directly with the collections office. Preparing a financial statement may help show that the levy creates immediate economic hardship.
3. Long-term strategies (30 days and beyond): The best ways to prevent future levies are to stay current with tax filings and make regular payments. Taxpayers should also monitor their financial situation, build an emergency fund, and, if necessary, seek professional advice to avoid repeat collection actions.

Key resources:

• North Dakota Office of State Tax Commissioner - www.tax.nd.gov
• Collections phone: 701-328-1244
• Email: collectionstax@nd.gov

Using these resources and acting promptly can help taxpayers manage the levy process more effectively and minimize lasting consequences.

Frequently Asked Questions

What is a North Dakota tax bank levy?

A North Dakota tax bank levy is a legal process that allows the Office of State Tax Commissioner to collect unpaid taxes by seizing money directly from a taxpayer’s bank account. Once served on financial institutions, the levy freezes funds up to the amount of the debt. The action continues until the money judgment is satisfied or exemptions are applied.

How much notice will I receive before a levy?

North Dakota law requires at least ten days’ notice before a levy is referred to the sheriff for collection. During this period, taxpayers can pay the debt, request a payment plan, or file an exemption notice. Ignoring this notice may lead to account freezes and collection actions. Acting quickly gives taxpayers the best chance to avoid further enforcement.

Can the state take all the money in my bank account?

No, the state cannot seize all funds without limits. The maximum amount includes the unpaid debt, $125 in fees, and nine months of interest. Certain funds, such as Social Security benefits, Supplemental Security Income, child support payments, and veterans’ benefits, are exempt under state and federal law. These protections ensure that essential items and basic needs remain covered.

How long does a bank levy last in North Dakota?

A standard levy through a garnishment summons lasts 360 days from the service date. For wage garnishment, the lien can continue for up to 270 days. After these periods, the levy expires unless renewed through a new court order. Taxpayers should know that new levy actions may follow if the unpaid debt remains.

Are joint accounts or protected funds affected?

Yes, joint accounts can be affected, but only the debtor’s portion should be subject to levy. Other account holders may need proof of ownership through documents such as a spousal affidavit. Exempt income like Social Security benefits, veterans’ benefits, and child support payments is protected, but taxpayers must assert these rights to prevent funds from being wrongfully seized.

Can I stop or reverse a bank levy after it starts?

Yes, taxpayers can stop or reverse a levy by paying the debt in full, negotiating a payment plan, or filing an exemption notice within twenty days. If exempt funds were seized, a court hearing may be scheduled to release them. Acting quickly and providing a complete list of documents helps protect legal rights and minimize financial hardship.

What should I do if I receive a levy notice?

If you receive a levy notice, act quickly. Contact the Office of State Tax Commissioner to discuss payment options, request a payment plan, or ask about exemptions. Review your financial situation and prepare documents such as bank statements and proof of exempt income. Seeking legal advice may also help. Ignoring the notice only makes collection actions more difficult to resolve.