This case study highlights how economic hardship, the Taxpayer Advocate Service, and timely action helped secure the release of a $262,317 IRS bank levy before the 21-day deadline expired.
When John and Mary (names changed for privacy) called our office, they were facing every taxpayer’s nightmare: the IRS had frozen their CitiBank account through a bank levy, placing $262,317 at risk. Unless the levy was released within the IRS’s mandatory 21-day holding period, the bank would be required to send those funds directly to the government.
For most people, losing access to more than a quarter-million dollars would be devastating. For John and Mary, it was potentially catastrophic.
Mary had been diagnosed with a rare and extremely painful form of cancer requiring treatment at UCLA Health several hours away and with specialists in a third county. The couple lived primarily on Social Security income, and much of the money in their account had been saved to help cover medical expenses, travel costs, prescriptions, and other necessities that Medicare did not fully cover.
What followed was a race against the IRS’s 21-day levy deadline involving hardship advocacy, the Taxpayer Advocate Service, congressional intervention requests, and a backup bankruptcy strategy prepared in case all other options failed.
This is the story of how we got that levy released and what every California taxpayer should know if the IRS freezes their bank account.
What Is an IRS Bank Levy and Why Is It So Dangerous?
An IRS bank levy is one of the most aggressive collection tools available to the federal government. Many taxpayers confuse a tax lien with a levy, but they are very different. A tax lien is the government’s legal claim against your property. A levy is the actual seizure of your assets.
The IRS does not need a court order to levy a bank account. Once the IRS serves a bank levy under Internal Revenue Code §6332, the bank is legally required to freeze the funds in the account. The document used to do this is called IRS Form 668-A, which is the official levy notice directing the bank to place a hold on a taxpayer’s funds.
Once the levy is received, the bank generally must hold the money for 21 days before sending it to the IRS. That 21-day period is often the taxpayer’s last opportunity to stop the levy and recover the funds.
For John and Mary, that 21-day clock started ticking the moment their bank received the levy.
Their account contained $262,317.
Money they had spent decades saving.
Money they needed to help pay for cancer treatment.
Money that could disappear forever if the levy was not released before the holding period expired.
Making matters worse, the IRS Revenue Officer assigned to the case was not returning calls.
A Revenue Officer is the IRS employee responsible for collecting delinquent tax liabilities and enforcing collection actions such as levies and liens. In hardship cases, reaching that person quickly can be critical.
Unfortunately, we could not get a response.
Why the Hardship Was Real: The Hidden Costs of Cancer Treatment Under Medicare
One of the most important arguments we made in this case was simple: Mary’s medical condition created a genuine economic hardship under federal law. Many people assume Medicare eliminates the financial burden of serious illness. Unfortunately, that is often not the case.
Original Medicare has no annual out-of-pocket maximum. Under Medicare Part B, patients generally remain responsible for 20% of covered treatment costs with no cap on how much they may ultimately owe. For patients battling rare cancers and receiving specialized treatment, that 20% share can become substantial very quickly. Mary also carried a Medigap Plan A supplemental policy, one of the most basic Medicare supplement plans available.
While Plan A provides some assistance with coinsurance and copayments, it does not provide the broader protections available under more comprehensive plans. It also leaves patients exposed to significant costs associated with specialized care and ongoing treatment.
The financial challenges extended beyond insurance coverage.
Like many communities in California’s Central Valley, Bakersfield has limited access to certain highly specialized cancer treatment programs. Mary frequently traveled approximately 110 miles to UCLA Health in Los Angeles and roughly 95 miles to specialists in Ventura. Those trips often involved more than 200 miles of travel in a single day.
Medicare generally does not reimburse routine travel expenses associated with obtaining specialty care. Gasoline, vehicle expenses, meals, lodging, and other related costs had to come from somewhere.
When we completed our financial analysis, we determined that Mary’s uncovered medical, pharmaceutical, and transportation expenses could range from approximately $102,000 to $255,000 annually. Meanwhile, the couple’s household income consisted primarily of approximately $38,000 in Social Security benefits.
The conclusion was unavoidable. These savings were not a luxury. They were not discretionary. They were essential to maintaining ongoing medical care and preserving Mary’s access to treatment.
That distinction became the foundation of our hardship argument.
The 21-Day Clock and a Revenue Officer Who Would Not Respond
The most urgent challenge was not proving hardship, the most urgent challenge was time. Once the bank received the levy, the bank was legally required to hold the funds for only 21 days before sending them to the IRS. If that deadline passed without a levy release, the money would be gone.
Every day mattered.
We called the assigned Revenue Officer.
Voicemail.
We called again.
Voicemail.
We faxed a hardship package.
No response.
We contacted the IRS Automated Collection System and spent hours on hold. We called every number we could find. We left messages. We sent documentation.
Nothing.
While frustrating, this situation is not uncommon. The IRS continues to struggle with staffing shortages and growing workloads, and reaching the person assigned to a case can sometimes feel impossible. But when a taxpayer is facing a hardship levy, waiting for a phone call is not a strategy, you have to know the escalation paths available and be prepared to use them all at the same time.
Building the Hardship Package
Our first step was assembling a comprehensive hardship package documenting exactly why the levy needed to be released.
We sent the package via FedEx overnight delivery to both the Revenue Officer and the local office of the Taxpayer Advocate Service. We wanted proof of delivery and proof that the documentation had been received.
The package included:
- A formal hardship letter citing IRC §6343(a)(1)(D)
- Three years of tax returns showing Social Security-only income
- Medical records documenting Mary’s cancer diagnosis and treatment
- Medicare and Medigap insurance information
- Financial projections showing anticipated treatment-related expenses
- Documentation regarding travel requirements for treatment
- Maps showing the distances between Bakersfield, UCLA Health, and Mary’s Ventura specialists
The evidence painted a clear picture. The levy was not simply inconvenient. It threatened the couple’s ability to continue receiving necessary medical care.
Filing Form 911 and Bringing in the Taxpayer Advocate Service
At the same time, we filed Form 911, the official request for assistance from the Taxpayer Advocate Service, commonly known as TAS. Many taxpayers have never heard of TAS, but it can be one of the most powerful resources available during an IRS hardship case.
The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers resolve problems when normal IRS channels are not working. Under IRC §7811, TAS has the authority to issue what is known as a Taxpayer Assistance Order, directing the IRS to take specific actions when necessary to prevent significant hardship.
In other words, TAS does not simply make suggestions; in the right circumstances, it has the authority to compel action.
Given the looming deadline and the Revenue Officer’s lack of responsiveness, we believed TAS involvement was essential.
Requesting Congressional Assistance
We also contacted all four congressional offices serving Kern County. That included the offices of David Valadao, along with Senators Alex Padilla and Adam Schiff. Ultimately, the team at Congressman Valadeo’s office was tremendously helpful, compassionate, and showed great care in doing everything they could to help these constituents.
Congressional offices cannot force the IRS to make a particular decision, but they can often help ensure that a taxpayer’s case receives prompt attention. Most congressional offices have dedicated constituent-services staff members who regularly assist individuals experiencing problems with federal agencies. Generally, those Congressional offices work directly with the Taxpayer Advocate, often getting far quicker responses than taxpayers or representatives get.
When a taxpayer is facing the loss of hundreds of thousands of dollars and serious medical hardship, every available avenue should be explored. Click here to find your member of Congress and their office.
Filing a TIGTA Complaint
We also prepared and submitted a complaint to TIGTA, the Treasury Inspector General for Tax Administration. TIGTA serves as the federal watchdog responsible for investigating IRS misconduct, administrative failures, and violations of taxpayer rights.
Our complaint documented the Revenue Officer’s failure to respond despite the imminent hardship and the rapidly approaching levy deadline. This was not a step we took lightly. In fact, filing a TIGTA complaint is extraordinarily rare in our practice. But the circumstances justified it.
Preparing a Bankruptcy Backstop
At the same time, we needed a contingency plan. We consulted with Bakersfield bankruptcy attorney Neil Schwartz and prepared a Chapter 13 bankruptcy filing that could be submitted on extremely short notice if necessary. A bankruptcy filing triggers what is known as an automatic stay under 11 U.S.C. §362. An automatic stay immediately halts most collection activity, including pending levy actions.
Had the IRS refused to release the levy and had TAS intervention failed, we were prepared to file the bankruptcy case before the 21-day period expired. We even had a process server ready to immediately notify the bank once a case number was issued.
Our goal was simple: if one strategy worked, great. If it didn’t, we wanted another strategy already moving.
And another.
And another.
When a taxpayer’s life savings are sitting in a frozen bank account and the 21-day clock is running, there is no room for waiting around to see what happens.
The Levy Release, a Last-Minute Problem, and a Critical Fix
The following Tuesday, we finally received the news we had been fighting for.
The Taxpayer Advocate Service contacted us and confirmed that the Acting IRS Group Manager (the boss of the Revenue Officer who issued the levy) had agreed to release the levy. We were informed that the Revenue Officer had been instructed to deliver the release personally to the John and Mary’s bank. After weeks of urgency and uncertainty, it appeared that the crisis had finally been resolved.
Then another problem emerged.
By Thursday morning, the final day of the 21-day holding period, the bank’s Bakersfield branch still had not received the levy release. John visited the bank repeatedly that week. Each time, he received the same answer from the branch manager: no release had arrived.
Meanwhile, we learned that the IRS had apparently delivered the release documentation to the bank’s branch in Long Beach rather than to the Bakersfield branch, where the levy was actually being administered.
That distinction may sound minor.
It wasn’t.
If the Bakersfield branch did not receive the release before the expiration of the holding period, the funds could still be transmitted to the IRS despite everyone agreeing that the levy should be released. After everything that had happened, we were suddenly facing the possibility of losing the entire account on a technicality.
Escalating the Issue Immediately
We immediately contacted the Taxpayer Advocate Service and explained the situation.
Our position was straightforward: the IRS had already agreed to release the levy, but the release had not been properly delivered to the location responsible for administering it. If the funds were transferred because of an administrative breakdown after the IRS had already approved the release, the consequences for the taxpayers would be severe.
The urgency of the situation could not have been clearer. The levy was supposed to be released. The clock was about to expire. And the bank still did not have the paperwork it needed.
Understanding Form 668-D
The document used to release a levy is called IRS Form 668-D. Just as Form 668-A is the document used to freeze funds, Form 668-D is the official document used to release them. Once a valid Form 668-D is received, the bank is instructed to remove the levy and release the funds back to the taxpayer.
At that point, the challenge became making sure the correct people had the correct document before time ran out.
Getting the Release to the Bank
We provided John with a faxed copy of the levy release that had been sent to us by the IRS. We then contacted the branch manager directly and walked through the situation:
- The IRS had issued a valid Form 668-D.
- The levy had been approved for release.
- The documentation existed.
- The issue was simply getting it into the hands of the people who needed it.
Fortunately, cooler heads prevailed. The documentation was reviewed, the release was recognized, and the levy was removed.
The funds remained in the account.
The crisis was over.
After weeks of uncertainty and a 21-day race against the clock, John and Mary kept access to the savings they needed for medical care and basic living expenses.
What IRC §6343 Actually Requires
One of the most important lessons from this case is that taxpayers have rights when an IRS levy creates genuine financial hardship.
The legal foundation for our hardship argument was Internal Revenue Code §6343(a)(1)(D). This statute states that the IRS shall release a levy when it determines that the levy is creating an economic hardship due to the taxpayer’s financial condition.
That language matters. The law does not say the IRS may release the levy, it says the IRS shall release the levy. In legal terms, “shall” is mandatory.
When the statutory requirements are met, the IRS has an obligation to act.
What Is Economic Hardship?
Economic hardship generally exists when a levy prevents a taxpayer from paying reasonable basic living expenses.
Every case is different, but common hardship factors may include:
- Serious medical conditions
- Disability
- Limited income
- Extraordinary healthcare expenses
- Necessary housing costs
- Transportation expenses required for work or treatment
- Dependence on Social Security or retirement income
In John and Mary’s case, the facts were overwhelming:
- Their household income was approximately $38,000 per year.
- Mary was actively undergoing cancer treatment.
- The couple faced substantial uncovered medical expenses.
- The levied funds represented the very savings they needed to continue paying for treatment and related costs.
Under those circumstances, the hardship argument was not merely compelling. It was supported by extensive documentation and the plain language of the law.
Documents Every Taxpayer Should Gather Immediately
If you are facing an IRS bank levy and believe the levy is creating financial hardship, documentation is critical.
We generally recommend gathering:
- Three years of tax returns
- Recent bank statements
- Medical records and treatment plans
- Health insurance documentation
- Pharmacy records
- Monthly expense information
- Transportation records related to treatment or employment
- Physician letters explaining medical necessity
- Any other documents showing why access to the funds is necessary
A hardship case is often won or lost based on documentation. The more clearly you can demonstrate the financial impact of the levy, the stronger your position becomes.
Most importantly, do not wait. The 21-day holding period continues running whether you are gathering documents or not. The sooner a hardship package is assembled, the more options may be available.
What Comes Next: Investigating the Underlying Tax Liability
Getting the levy released was a major victory, but it was not the end of the case. The underlying tax liability remains, and our review of the IRS account transcripts raised several important questions that still need answers.
According to the transcripts, John and Mary filed their 2015 and 2016 tax returns on time and paid the balances reported on those returns. The original payments appear on the transcripts and were credited by the IRS. However, beginning in August 2019, more than three years after the returns had been filed and paid, significant balances began appearing on both accounts.
What caught our attention was what did not appear.
- We found no obvious audit assessment.
- We found no Substitute for Return.
- We found no immediately identifiable assessment event explaining the creation of approximately $163,489 in principal balance.
That does not necessarily mean the liability is invalid. It does mean that further investigation is warranted. Based on our review so far, there are significant questions about how the balance was created and whether all transactions were properly applied and recorded.
Understanding a Doubt as to Liability Case
This type of situation may fall into what tax professionals refer to as a Doubt as to Liability case. A Doubt as to Liability claim arises when there is a legitimate question about whether the tax debt the IRS is attempting to collect is actually owed. This is very different from a taxpayer simply being unable to pay.
Instead, the issue is whether the liability itself is correct.
When reviewing transcript issues, one common concern is the possibility of misapplied payments or credits. If payments are moved to another tax year or account, an otherwise satisfied account can appear to have a balance due, triggering penalties and interest that continue to grow over time. At this stage, we are continuing to investigate the account history and determine whether the balances shown by the IRS accurately reflect what is legally owed.
Our Current Resolution Strategy
At present, we are pursuing a dual-track strategy. The first avenue involves investigating potential Doubt as to Liability issues and determining whether the underlying assessments are fully supported by the account records. The second avenue involves pursuing relief based on collectability and economic hardship should the liability ultimately be upheld.
One tool that may become relevant is an Offer in Compromise (OIC). An Offer in Compromise is a formal IRS settlement program that allows certain taxpayers to resolve tax liabilities for less than the full amount claimed by the government.
The appropriate resolution will ultimately depend on the results of the transcript investigation and the IRS’s response to the evidence. For now, our focus remains on determining exactly how the liability was created and whether the amounts being collected are accurate.
Lessons Every California Taxpayer Should Take Away From This Case
John and Mary’s experience highlights several important lessons for taxpayers facing IRS collection action.
1. The 21-Day Levy Period Matters
Many taxpayers do not realize that a bank levy is not necessarily immediate. In most cases, the bank must hold the funds for 21 days before sending them to the IRS. That window may be the taxpayer’s best opportunity to stop the levy, assert hardship, or pursue other relief options. Once those funds are transferred, recovering them becomes significantly more difficult.
2. Economic Hardship Protections Are Real
Many taxpayers assume that once the IRS issues a levy, there is nothing they can do. That is simply not true. Under IRC §6343, the IRS is required to release a levy that creates economic hardship under qualifying circumstances. Serious medical conditions, disability, retirement income limitations, and extraordinary expenses can all be relevant factors.
3. The Taxpayer Advocate Service Can Be Extremely Effective
The Taxpayer Advocate Service exists for situations exactly like this. When traditional IRS channels break down or a taxpayer faces significant hardship, TAS can often help move a case forward. Many taxpayers never realize this option exists.
4. Documentation Wins Cases
Hardship arguments are rarely won through emotion alone.
They are won with records.
- Medical documentation.
- Financial records.
- Expense reports.
- Treatment plans.
- Insurance information.
The stronger the documentation, the stronger the case.
5. Always Have a Backup Plan
One reason we were comfortable pushing every available avenue was because we had contingency plans in place.
- Congressional outreach.
- TAS involvement.
- TIGTA complaints.
- Bankruptcy preparation.
When deadlines are measured in days rather than months, it is important to have multiple options available.
Final Thoughts
For John and Mary, the levy release meant far more than preserving a bank account. It meant preserving access to cancer treatment. It meant protecting years of savings. And it meant giving them the opportunity to continue addressing the underlying tax issues without losing the resources they needed to care for themselves.
If you are facing an IRS bank levy in Bakersfield, California’s Central Valley, or anywhere else in the country, do not assume the situation is hopeless. The most important thing you can do is act quickly. Once a levy hits your account, the clock starts running. Understanding your rights, assembling the right documentation, and pursuing the right strategy can make all the difference.
If you need help dealing with an IRS levy, economic hardship claim, Taxpayer Advocate Service request, Offer in Compromise, or other tax resolution matter, contact Tax Crisis Institute today. The sooner you act, the more options you may have.
Dana M. Ronald is an authorized tax representative with Tax Crisis Institute and has spent more than 40 years helping taxpayers resolve IRS problems, levy actions, and complex tax controversies.