When the IRS Freezes Your Client’s Bank Account, Everything Else Freezes Too

If you work with clients who owe back taxes—whether you're a CPA, a bankruptcy attorney, a family law attorney, a financial advisor, or another trusted professional—the moment an IRS bank levy hits is the moment all hell breaks loose.

Deals stall. Payrolls bounce. Settlements get delayed. Real estate closings fall through.

And by the time your client mentions it, the money is already frozen—and the 21-day countdown has started.

Understanding how bank levies work doesn’t mean you’re supposed to be able to resolve the problem yourself. But it does mean you’ll be ready when a client needs clarity, fast.

Let’s break down what happens when the IRS levies a bank account—and the six most important things you need to know when your client gets hit with one.

Why This Matters to You

IRS bank levies don’t just take funds—they throw a wrench into everything else, including the deal you’re working on and, potentially, your ability to get paid.

If you’re helping that client with a divorce settlement, a loan application, a business restructure, or even just planning their next steps financially, a sudden IRS action can blow it all up.

This article will walk you through the basics of how levies work, how quickly they escalate, and what options still exist after the levy has been issued.

6 Things You Need to Know When Your Client Has an IRS Bank Levy

1. The IRS Doesn’t Get the Money Immediately

Once a bank receives a levy notice from the IRS, it’s legally required to freeze the funds in the account for 21 days.

During this period, your client cannot access the money—but the IRS doesn’t have it yet either.

That 21-day window is critical. It’s the only opportunity left to negotiate a resolution, get a levy release, or stop the IRS from taking the funds. After that, the bank is required to turn the money over.

2. The IRS Already Gave Your Client a Heads-Up—They Just Didn’t Act

➲ By the time a client’s bank account is frozen, the IRS has:

• Assessed the tax liability

• Sent multiple, required, notices

• Issued a Final Notice of Intent to Levy (with a 30-day warning period before enforcement action can move forward).

If your client didn’t respond in time, the IRS moved forward—and instructed the bank to freeze the funds. The bank has already initiated the levy. There are no more warnings. It’s happening.

Your client might’ve missed it. They might’ve ignored it. They might’ve misunderstood what it meant.

Doesn’t matter.

Once that window closes, the levy can be issued without any further communication. That’s why a client might seem blindsided—because in their mind, nothing was urgent.

Until it was.

3. Only the Money in the Account at That Time Is at Risk

Generally, a bank levy isn’t a blank check. The IRS can only take what’s in the account at the moment the levy hits.

Anything deposited afterward is not subject to that particular levy. That said, the IRS can levy again, as often as they need to, until the balance is resolved.

If your client continues to ignore the issue, they should expect more levies to come.

4. The IRS Knows Where to Find the Money

This part surprises people: your client doesn’t need to “tell” the IRS where they bank.

➲ The IRS gathers this data from:

• Filed tax returns

• W-2s and 1099s

• Past payments and refunds

• Third-party information tied to their Social Security Number or EIN

If your client has interacted with the IRS financially in any way, the agency already has a good idea where their assets are sitting.

5. Levies Are Legal, and the Law Is On the IRS’s Side

The IRS has the legal authority under IRC Section 6331 to issue levies and seize assets to satisfy unpaid tax debt.

But unlike any other creditor, they don’t need a court order. They don’t need permission. Once the proper notices have been sent and ignored, they can proceed.

I’ve said it many times: the IRS is the most powerful collection agency in the country.

And while there are exceptions—like economic hardship or a pending appeal—those don’t apply automatically. You have to raise them.

6. A Bank Levy Can Be Stopped, But Not Without Proactive Action

➲ There are legitimate ways to stop a levy from going through:

• Negotiating an installment agreement, streamline, CSED based, financially based or Partial Pay

• Negotiating a Currently Not Collectible status

• Filing a Collection Due Process appeal (but within 30 days of the Final Notice of Intent to Levy). Once the levy is issued, it’s too late for that.)

But none of this happens on its own. The IRS intends to take its money. You have to advocate for yourself if you want to stop them.

TL;DR – What to Know When a Client Has an IRS Bank Levy

⏩ An IRS bank levy freezes the funds in your client’s account—but there’s a 21-day window before the IRS receives the payment.

⏩ This only happens after multiple ignored notices, including the Final Notice of Intent to Levy.

⏩ The levy grabs only what’s in the account at the time it hits.

⏩ The IRS can find bank accounts through past filings, payments, and third-party reporting.

⏩ If the tax debt remains unresolved, additional levies will follow.

⏩ While there are methods to halt a levy, time is crucial

Call to Action

IRS bank levies aren’t just about unpaid taxes. They’re about messing up everything in your client’s life, including the services you’re providing.

➲ So here’s the question:

➤ Have you ever had a client come to you after their bank account was levied by the IRS?

➤ How did you handle it?