In Philadelphia, PA, a bank levy can sweep up money in a financial account even when part of the balance is restricted or disputed. The first question is not whether the bank received the levy, but whether you have proof that some of the funds belong to a third party, are subject to another court process, or otherwise should not be treated as the taxpayer’s property. That distinction drives the next IRS response.
Thank you for reading this post, don't forget to subscribe!Why the bank’s hold does not resolve ownership
IRM 5.11.4 explains that when the IRS serves a levy on a bank or similar institution, the bank must generally wait 21 calendar days before surrendering the funds, unless the depositor waives the wait. That holding period gives time for the balance to change, the levy to be released, or ownership questions to surface.
But the hold itself does not decide who owns the money. Under IRM 5.11.4, a levy can attach to funds the taxpayer can withdraw, even when another person also contributed to the account. That means a joint account, a business account, or an account with special restrictions may still be treated as levied property unless you can document why the funds are not subject to the taxpayer’s unrestricted right to withdraw them.
What records best show the funds are not the taxpayer’s
The most useful records are the ones that connect the disputed balance to its real owner and show any limits on withdrawal. Examples include the bank’s account agreement, signature cards, deposit records, canceled checks, wire confirmations, court orders, escrow instructions, divorce or settlement paperwork, trust documents, and correspondence showing a specific restriction on use.
If the dispute is with a co-owner or another claimant, separate the question of legal ownership from mere name on the account. IRM 5.11.4 notes that the bank may send funds to the IRS when the taxpayer has an unrestricted right to withdraw, even if deposits came from someone else. A third party may then pursue relief as a potential wrongful levy under IRC 6343(b) or a suit under IRC 7426(a)(1).
How the IRS treats disputed or wrongfully levied funds
When additional time is needed beyond the 21-day bank hold to sort out ownership, IRM 5.11.4 says the bank can be asked to hold the funds longer, with a specific extension date for forwarding the money and a deadline for the claimant to provide substantiation. That practical step can matter when the records are incomplete or the bank needs direction before remitting.
If the funds are already turned over, the path changes. The third party generally must use the administrative wrongful levy process described in Publication 4528 under IRC 6343(b). If the IRS denies that claim, the person may be able to request a CAP hearing on the denial. This is different from a levy release: a release stops further collection action against the levied property, but it does not itself erase the underlying tax debt. A withdrawal of an NFTL, a release of a tax lien, a discharge of specific property, and satisfaction of the debt are separate actions with different effects.
Practical next step for a Philadelphia account dispute
Start by matching the levy notice to the account records and identifying exactly which money is restricted, disputed, or traceable to a non-liable person. Then organize a short packet: the levy notice, the most recent statements, proof of the source of deposits, and any legal document that limits who may use the funds.
If the account is at a Philadelphia-area bank, ask the bank how it identified the levied balance and whether the 21-day period is still open. If the money clearly belongs to someone other than the taxpayer, prepare a wrongful levy package instead of assuming the IRS will sort it out from the bank’s records. For general IRS office contact information, use the IRS local office locator; for broader taxpayer advocacy help, the Taxpayer Advocate Service locator may be useful.
Questions about A bank balance includes restricted or disputed funds
Does a joint bank account automatically belong to the taxpayer for levy purposes?
No. A joint account can still be levied if the taxpayer has an unrestricted right to withdraw funds, but a non-liable co-owner may still pursue wrongful levy relief if the money is actually theirs.
Can the bank keep funds longer than 21 days?
Yes, in some cases the bank can be asked to hold the funds longer while ownership is investigated. IRM 5.11.4 says the extension should include a specific date and a deadline for substantiation.
If the IRS already took the money, is the dispute over?
Not necessarily. If the funds were wrongfully levied, the third party may file an administrative claim under IRC 6343(b) or pursue a court action under IRC 7426(a)(1), depending on the facts.
Request a bank levy record review
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General educational guidance. Relief and collection protections depend on the actual notices, account history, financial evidence, and applicable law. A consultation does not itself stop enforcement or preserve an appeal deadline.
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