Yes, you can open a checking account, but the IRS can garnish it

You can open a new checking account even if the IRS has a wage garnishment against you. Banks do not refuse accounts based on tax debt or existing levies. However, if the IRS knows about the account and has issued a bank levy (a legal order to freeze funds), they can seize money in that account up to what you owe. A wage garnishment and a bank levy are different things — one takes money from your paycheck, the other freezes your bank balance.

The practical question is whether opening a new account will help you keep money away from the IRS. The answer depends on whether the IRS has already filed a levy against you, and whether they know where your money is.

Key Takeaways

  • Banks will open a checking account for you regardless of IRS debt or wage garnishment, because tax debt is not a banking disqualification.
  • A wage garnishment takes money from your paycheck before it reaches you; a bank levy freezes money already in an account you own.
  • If the IRS has filed a bank levy, they can seize funds in any account registered in your name, including new ones, once they notify the bank.
  • Direct deposit into a new account may protect future paychecks from a wage garnishment, but only if the garnishment has not yet been served on your employer.
  • The IRS can update a levy to cover new accounts if they discover them, so opening accounts to hide money from the IRS does not work long-term.

How wage garnishment and bank levy work differently

A wage garnishment is an order the IRS sends to your employer telling them to withhold a portion of your paycheck and send it to the IRS. Once your employer receives the garnishment notice, they must comply — the money never reaches your bank account. You see the reduction in your paycheck.

A bank levy is a separate legal action. The IRS sends an order directly to your bank instructing them to freeze and surrender funds in your account. This happens after the money is already yours and sitting in the bank. The bank must comply within a set timeframe, usually a few days to a week.

If you have a wage garnishment but no bank levy, opening a new account does not stop the garnishment — your employer will still withhold from your paycheck. If you have a bank levy, the IRS can apply it to any account they know about that is registered in your name.

Whether a new account protects you from wage garnishment

A wage garnishment is tied to your employer, not your bank account. Changing banks or opening a new account will not stop your employer from withholding money. The garnishment order stays in effect until the IRS releases it, which usually happens when you have paid the debt in full, reached a settlement, or the debt becomes uncollectible.

The only way a new account could theoretically help is if your employer has not yet received the garnishment notice and you change your direct deposit before they do. Once your employer has the notice, they are legally required to withhold regardless of which account you direct the money to. Attempting to circumvent a garnishment by changing accounts after notice has been served can create legal problems for you.

If you want to stop or reduce a wage garnishment, you need to contact the IRS directly. You can request a Collection Due Process hearing to challenge the garnishment, or you can explore payment plans or an Offer in Compromise if you cannot pay the full amount.

What happens if the IRS has filed a bank levy

If the IRS has already filed a bank levy against you, opening a new account at a different bank will not help. Once the IRS files a levy, they can update it to include new accounts as they discover them. The levy remains in effect until the IRS releases it or the debt is resolved.

When the IRS files a levy, they typically target the bank where they know you have an account. If you open an account at a completely different bank and the IRS does not know about it, the levy will not immediately apply to that account. However, if the IRS later discovers the new account through a bank search or other means, they can expand the levy to cover it.

The IRS does not routinely search for new accounts, but they do have access to banking information through the Financial Crimes Enforcement Network (FinCEN) and can request account information from banks during collection efforts. Deliberately hiding money from the IRS by opening secret accounts can also lead to fraud charges if discovered.

How to learn about you have a wage garnishment or bank levy

Contact the IRS directly to find out what collection actions are in place against you. Call the IRS at 1-800-829-1040 and ask to speak with a representative about your account. Have your Social Security number and any tax year in question ready. They can tell you whether a wage garnishment has been issued, whether a bank levy is active, and the amount owed.

You can also check your pay stub — if a wage garnishment is active, you will see a line item showing the withholding. If you receive a notice from your bank saying funds have been frozen or seized, that indicates a bank levy has been served.

Request a copy of your IRS account transcript, which shows all collection actions, payment history, and the current balance owed. You can order this free from the IRS website or by calling 1-800-829-1040.

Steps to take if you want to open a new account

You can walk into any bank and open a checking account. Bring a government-issued ID, proof of address (a utility bill or lease), and your Social Security number. Banks do not run tax debt checks as part of the account-opening process.

Before you open the account, decide how you will use it. If you have a wage garnishment and want to protect future paychecks, you could try changing your direct deposit to the new account — but only if the garnishment has not yet been served on your employer. Once served, this will not work.

If you have a bank levy, opening a new account is not a solution to the underlying problem. The better approach is to contact the IRS about your options: setting up a payment plan, requesting a levy release if you have hardship, or exploring settlement options.

Options for stopping or reducing collection actions

If a wage garnishment or bank levy is causing you hardship, you have several options. You can request a Collection Due Process hearing within 30 days of receiving the IRS notice. This hearing allows you to challenge the collection action or propose an alternative arrangement.

You can also request a Currently Not Collectible status if you are unable to pay due to financial hardship. This temporarily pauses collection efforts, though interest and penalties continue to accrue. The IRS will revisit your case periodically to see if your situation has improved.

A payment plan (installment agreement) allows you to pay the debt over time, which may stop the garnishment or levy. The IRS offers short-term plans (120 days or less) and long-term plans (more than 120 days). You can set up a plan online, by phone, or through a payment processor.

An Offer in Compromise lets you settle the debt for less than you owe if you can show you cannot pay the full amount. This is harder to obtain and requires detailed financial documentation, but it can resolve the debt permanently.

Frequently Asked Questions

Can the IRS see all my bank accounts?

The IRS does not automatically see all your accounts, but they can request account information from banks during collection efforts. They also have access to FinCEN data and can search for accounts linked to your Social Security number. If you have a bank levy, it applies to accounts the IRS knows about; if they discover new accounts later, they can expand the levy.

What if I put money in someone else's account to avoid the levy?

This is considered fraud and can result in criminal charges. The IRS can pursue the money regardless of whose name is on the account if they can show it belongs to you. It also does not resolve your tax debt — the IRS will continue collection efforts.

Will opening a new account hurt my credit?

Opening a checking account does not affect your credit score. Banks do not report checking accounts to credit bureaus. However, if the bank reports you to ChexSystems (a banking history database) due to unpaid fees or fraud, it may make it harder to open accounts at other banks in the future.

Can I get the wage garnishment stopped if I set up a payment plan?

Yes. If you set up a payment plan with the IRS, they will typically release the wage garnishment. You need to contact the IRS to arrange the plan — you can do this online, by phone, or through a tax professional. The garnishment does not automatically stop; you must request the release once the plan is in place.

How long does a bank levy stay in effect?

A bank levy typically remains in effect for 21 days from the date the bank receives it. The bank must hold the funds during this period. After 21 days, if the IRS has not taken further action, the bank releases the funds back to you. However, the IRS can file a new levy if the debt remains unpaid.