How to Remove IRS Bank Levy

The IRS Bank Levy

Holding Period for a IRS Bank Levy

By Federal Law, a bank must wait 21 calendar days after a levy is served before sending payment. Then, on the next business day, it must turn over the taxpayer’s money.

The depositor(s) can waive this waiting period. The bank will not send money that is subject to attachment or execution under judicial process. “Bank” includes credit unions, savings and loan associations, trust companies, and others described in IRC 408(n) and Treas. Reg. §301.6332–3(b).

During the holding period, a levy might be released, or the amount owed could decrease.

If the bank receives no release, it must send the payment after the holding period.

No additional notice is required.

The Role of the Bank Liaison for the IRS Bank Levy

money is sent.

Assign a bank liaison in each territory to settle these issues quickly.
Sometimes ownership is not settled before the holding period ends. If this happens, ask the bank for more time.

Problems can exist for Multiple Signature Authority for a Bank Account for Levy purposes

• A levy served to a bank attaches to funds in a bank account for which the taxpayer has an unrestricted right to withdraw funds (signature authority) – even if multiple persons have signature authority for that bank account.
• As noted in Treasury Regulation 301.6332–1(c)(4) the unrestricted right to withdraw funds is an interest which is subject to levy.
• An example.
• A bank is served with a notice of levy for an unpaid tax liability due from the taxpayer in the amount of $2,000. The bank holds $2,000 in a checking account in the names of a taxpayer and a third-party.
• Although all of the deposits into the account were made by the third-party, the taxpayer has an unrestricted right to withdraw the funds from the account. The bank may send the Service the entire account balance at the end of the 21 day holding period.
• The bank is not liable to the third-party for any amount, even if the third-party proves that the funds in the account did not belong to the taxpayer, because the taxpayer’s un-re stricted right to withdraw the funds is an interest which is subject to levy.
• The third-party may, however, seek the return of the funds from the United States by making an administrative wrongful levy claim under IRC 6343(b) or file a suit under IRC 7426(a)(1) should the administrative claim be denied.
• A non-liable third-party may claim ownership of funds in a bank account when multiple people hold signature authority for that bank account. Treat this dispute as a potential wrongful levy.
• A wrongful levy is a levy that improperly attaches property belonging to a third party in which the taxpayer has no rights.
• For bank levies if additional time is needed beyond the 21 day hold period to determine ownership, request the bank hold the funds.
• Provide the potentially wrongfully levied party a deadline date for providing substantiation and provide the bank with a specific extension date to forward the funds.