What to Expect from an IRS Notice of Intent to Levy

Meeting your tax obligations each year is hard enough. What if you start receiving notices from the IRS? This may happen if you make a mistake on your return or you can’t afford to pay your tax debt. Whatever the reason, IRS notices need to be taken seriously. If you’ve struggled to pay your taxes, you may eventually receive something called a notice of IRS levy. This notice means the IRS is planning to levy your assets if you don’t take care of your tax debt sooner rather than later. Unfortunately, a notice of levy means the IRS has already taken collection actions and sent other notices to no effect. So, what is a notice of levy, exactly, and how does it impact you? How many notices does the IRS send before levying? Here are all the details you need to know if you find yourself in this situation.

What Is a Notice of Intent to Levy?

Before understanding your intent to levy notice, you need to know what IRS asset seizure means. If you have failed to pay your tax bill, respond to notices, or tried to resolve your tax debt, the IRS may take steps to seize your assets to cover your tax debts. A notice of intent to levy assets informs you of the IRS’s intent to take this action. The IRS is basically saying that they’re going to take your property if you don’t pay what you owe. It’s legally required for the agency to notify you before they take this action, and they need to send it at least 30 days before seizing your assets. To deal with this notice, first try to pay off your debt or set up a payment plan with the IRS. Talk to a tax professional if you’re not sure what to do. You’ll have a deadline listed on the notice that you need to follow to avoid the seizure of your assets.

What Assets Can the IRS Seize?

The IRS could technically seize any type of asset or property that has value to cover what you owe. This could be:

• Your home or vehicle
• Other personal property
• Bank account assets
• Wages from an employer
• Social Security or other retirement benefits
• State tax refunds

Needless to say, you don’t want to be in a situation where the IRS comes for your property. Make sure you talk through your options with a tax pro when you receive an IRS notice of intent to levy in the mail.

Types of IRS Notices Regarding Tax Levies

There are several IRS notices out there that state an intent to levy. Here are which forms to be on the lookout for:

• CP504: This is the general IRS intent to levy notice used for individuals.
• CP504B: This one is the same but for businesses.
• CP90: This is a final notice of intent to levy for individuals.
• CP297: This is a final notice of intent to levy for businesses.
• Letter 1058 or LT11: These are also final notices of the IRS’s intent to levy, and they notify you that you have a right to a hearing.

You also could receive different types of notices based on the assets the IRS is going to seize. There is a specific letter for wage garnishment, for example. All of these types of notices may indicate that the IRS is intending to levy your property in some form or fashion. These notices will give a deadline by which you need to act. If you fail to do so, then the IRS will move forward with asset seizure.

How the Collection Process Works

You also need to know what steps are involved in IRS collections. You’ll likely receive several notices throughout the process, many before the notice of intent to levy. Here are the notices involved:

Notice CP14

Typically, CP14 is the first notice you’ll receive from the IRS. This one is automatically generated by the Automated Collection System (ACS) and tells you that you owe unpaid taxes to the IRS based on the tax return you filed. The ACS monitors tax returns, collects delinquent taxes, contacts taxpayers, and issues notices for the IRS. Read this notice thoroughly. It will include the exact amount you owe and instructions for paying your balance, whether in full or through a payment plan. If you disagree with these findings, the notice will include contact information to talk to the IRS about it. It’s also a good idea to ask a tax expert for assistance.

Notices CP501 and CP503

The next steps in the collections process are receiving subsequent notices of your unpaid balance, including CP501 and CP503. These notices reiterate your balance and state that the IRS still hasn’t received your overdue payment outlined in your previous notice or notices.

Notice of Federal Tax Lien

Throughout these collection attempts, the IRS could file a Federal Tax Lien, which is a public record that the IRS has a right to your interests in assets that could be used to cover your outstanding tax debt. Unfortunately, a lien could impact whether you can get approved for a loan, lease, or credit card.

Notice of Intent to Levy

If the IRS’s collection activities have still failed to get payment from you, then comes CP504 or CP504B, Notice of Intent to Levy. Beyond a tax lien, a levy indicates that the IRS will take action to seize your property if you don’t act by the deadline.

Other Penalties and Potential Charges

When a taxpayer’s delinquent taxes get bad enough, meaning there is a significant balance that hasn’t been paid and there’s been no communication about it, penalties and interest will continue to build. Some taxpayers may even face legal charges, significant fines, and even jail time in the event of tax evasion or tax fraud. Typically, the IRS must find that you’ve willfully misled the IRS or avoided your tax obligations.

How to Prevent an IRS Tax Levy

No one wants to be in a situation where the IRS could levy assets and property. Fortunately, you can avoid getting into this scenario by being proactive and doing your due diligence with tax compliance. Follow these steps to prevent an IRS tax levy:

• Pay and file your tax return by the deadline: The best thing you can do to stay in good standing is to file your tax return by the annual deadline (April 15) and pay off your tax bill accordingly. If you owe estimated taxes, those deadlines are April 15, June 15, September 15, and January 15.
• Never ignore IRS notices: Anytime you receive a notice in the mail, don’t ignore it. It won’t just go away. As soon as you realize you made a mistake or missed a deadline, pay what you owe, including your balance and any additional penalties and interest.
• Work with the IRS for a relief option: The IRS would much rather you be honest with them about your financial situation than ignore a notice altogether. You may qualify for an offer in compromise, an installment agreement, penalty abatement, or a temporary delay in collections.
• Act right away when you receive a notice of intent to levy: If your unpaid tax bill has gone as far as getting a notice of intent to levy, act fast. Pay off what you owe by the deadline or get in touch with the IRS according to the instructions on your notice. This will prevent the IRS from levying your assets.

Don’t forget that a great way to stay in compliance is to work with a tax expert, like a CPA or tax attorney. This is especially helpful when you aren’t sure how to get your tax debt paid off or you don’t know how to respond to a notice.

What If You Can’t Pay Taxes?

Let’s talk a bit more about your options when you can’t afford to pay your tax balance in full. Ideally, you will pay everything you owe when you file your tax return. However, many Americans don’t have the resources to do that. These are the tax relief options the IRS offers:

• Payment plan/installment agreement: This is a very common method for taxpayers. You can apply online in most cases, and you’ll set up a plan to pay monthly installments until your balance is paid off. When you have an agreement in place, the IRS won’t take collection actions against you, like liens or levies.
• Offer in compromise: If you’re dealing with a special financial situation, you can send in an offer in compromise. This is a lower amount that you are requesting to pay based on your finances. If the IRS believes this is all they can reasonably expect to collect from you, they may settle with you.
• Currently not collectible (CNC) status: Financial hardships cause many people to struggle to pay taxes. You can let the IRS know about a hardship you’re experiencing, along with any supporting documentation, and they may agree to put your account in CNC status. This means they’ll temporarily delay collections—but eventually, you’ll have to pay when your situation improves.
• Penalty abatement: Some taxpayers get under loads of debt thanks to building penalties and interest charges. Stay ahead of this risk by applying for penalty abatement. First-time abatement could be an option if you have a good track record with the IRS in recent years.
• Tax filing extension: You also can apply to extend your filing deadline by six months. While this gives you extra time to file your tax return, you unfortunately still have to pay any tax balance by the original deadline of April 15. But some people put off filing because they don’t have everything organized just yet.
• Spousal relief: The IRS also offers options for innocent or injured spouses. An innocent spouse is someone who may not have known about an underreporting or income by their spouse on their joint tax return, and an injured spouse may be someone whose tax refund was used to cover the debts of their spouse.

The IRS will typically work with you if you’re proactive, upfront, and honest. When you can’t pay your taxes, don’t just ignore the notices and penalties coming in. This makes your situation even worse, and likely increases your overall balance owed.

Why You Should Talk to a Tax Expert Now

Tax issues aren’t fun, especially when you’re stressed about a notice coming in the mail. However, paying taxes, filing returns, and complying with tax law are just part of living and working in the U.S. If you find yourself facing an audit, getting notice after notice about delinquent taxes, or even facing a seizure of your assets from the IRS, you don’t have to go it alone. Working closely with a tax advisor, attorney, CPA, or other tax professional will help you get back on your feet. These professionals can act on your behalf and negotiate with the IRS. The team at Timothy S. Hart Law Group has heard it all and continues to get clients the outcomes they’re looking for. Our legal team gets to know your situation, learns about your goals and challenges, and helps you pave the right way forward. Whether you need tax representation, help with an audit, relief options for tax debt, or assistance with a notice of intent to levy, we’re here to assist you. Contact our office to set up a consultation.