A surprise notice from the IRS can quickly derail your plans, both in business and personally. But how should you respond?
What can you do to get the IRS to take you seriously, offer you a reasonable path to relief, and give you the best possible deal?
Today, you’ll learn exactly what to tackle when it comes to IRS tax debt to reduce IRS pressure.
You already know you need to settle. Here’s how to start making progress toward that goal.
We’ll start things off with the 4-5 notices the IRS sends you about 5 weeks apart which let you know they are about to levy. Here's the good news you should know:
The IRS must send you several notices before seizing your assets.
The last notice is called "Final Notice. Notice Of Intent To Levy and Notice of Your Right to a Hearing". This means you are running out of time before the IRS can levy your bank account. The word “levy” means involuntary seizure or taking.
The IRS can also garnish your wages or take other drastic collection action. It can be confusing to know when the IRS is about to seize assets!
The second-to-last notice is also called Notice of Intent to Levy, but doesn’t advise you of your right to a hearing.
This notice does not give the IRS the authority to take your assets like the last one.
Normally, you will get a series of four or five notices from the IRS before the seize assets. Only the last notice gives the IRS the legal right to levy.
The law requires the IRS to give proper notice before they can levy your bank account.
According to Internal Revenue Code Section 6330, the IRS is required to notify you in writing before levying. The notice must include information telling you about your right to appeal the threatened collection action within 30 days.
The second to last letter - Notice of Intent to Levy
The second to last letter "Notice of Intent to Levy" does not contain this notice of your right to appeal.
Here is a link to the IRS website that explains what notice the IRS must give before levying.
These notices are about five weeks apart so that you have at least four or five months to prepare for the final notice.
You should not be surprised when the day comes for you to take action to prevent drastic consequences from IRS collection activity.
Here are the collection letters the IRS mails to individuals:
- CP14 (Notice of unpaid taxes)
- CP501 (Reminder of unpaid taxes)
- CP503 (Second reminder of unpaid taxes)
- CP504 (Notice of Intent to Levy) May seize state tax refund by stated deadline.
- Letter 1058 or LT 11 and other letters (Final Notice. Notice of Intent to Levy and Notice of Rights to Appeal).
The first three notices are sent by regular mail and the final two by certified mail. Here are steps to take when you receive the last notice.
3 Action Steps To Take When You Receive the Final Notice of Intent To Levy:
1. Read the notice carefully.
It should state “Final Notice. Notice of Intent to Levy and Notice of Your Right to Appeal”.
If it only states “Notice of Intent to Levy”, this is not the final notice that gives the IRS authority to seize your assets (other than state tax refunds). If the letter does not give you notice of your right to appeal this IRS collection action, you still have one notice to go before they can levy.
Another way to tell is by the designation of the notice found at the top right of the notice.
The final notice is an LT11 or L1058 (and others as well). The one designated as CP504 is the second-to-last notice mentioned above. This one does not give the IRS the right to levy, because it does not contain a notice of your right to appeal this action by the IRS.
2. Take notice of the collection date.
Next, take notice of the date when the IRS can actually take action to seize your assets.
You will find it is listed on the notice. Here is the language used and found around the middle, left side of the first page (bold is our emphasis):
We haven’t received a payment despite sending you several notices about your overdue taxes. The IRS may seize (levy) your property or your rights to property on or after April 1, 2020.
In this example you need to take action by April 1, 2020 or risk levy action by the IRS.
If you ignore this deadline you might be dismayed when you visit an ATM and realize there is no money in your account.
Or your employer might tell you that a significant portion of your paycheck has been garnished by the IRS. Fortunately, you can prevent this from happening to you.
3. File an appeal.
The third step to take when you receive this last "Final Notice. Notice of Intent to Levy and Notice of Your Right to a Hearing" is to file an appeal. This gives you time to consider your options by preventing the IRS from levying your assets.
By filing an appeal, you take the file away from the Collections Division and place it in the hands of the Appeals Division. This will normally give you several months to resolve your situation.
Sometimes even without an appeal you can contact the Collections Division of the IRS. You can try to work out a solution with them to prevent the IRS from levying your bank account or seizing other assets.
There are a number of options you have to resolve your tax liability including:
- Full Pay Installment Agreement
- Partial Payment Installment Agreement
- Currently Not Collectible Status
- Abatement of Penalties
- and sometimes elimination of tax debt. This is due to expiration of the period allowed for the IRS to collect the amounts owed. There are other possible options available depending on the circumstances of each case.
For more , check out this blog post where I go over the different installment agreements in detail.
Sometimes though, you need professional help.
This depends on the amount owed, personal financial condition, and accuracy of the IRS' assessment of your tax liability. You might be better off hiring someone who deals with the IRS on a regular basis.
IRS laws and regulations can be confusing. Most people will not be able to figure out their rights and settlement options when negotiating with the IRS.
By consulting with an experienced IRS tax resolution attorney you can usually resolve your tax liability in your best interest. An attorney will represent you before the IRS so that you do not have to have any contact with the IRS.
Affording attorney's fees.
There are several ways that taxpayers are able to hire an attorney to represent them before the IRS.
In some situations your attorney may be able to reduce the amount of tax, penalties and interest owed. Depending on the details of each case, sometimes the taxpayer’s liability is significantly reduced. A knowledgeable attorney helps the taxpayer to exercise legal rights provided by U.S. tax laws.
In other situations you can negotiate payment arrangements (Installment Agreement) for your tax liability. The IRS will usually allow a reasonable monthly budget expense amount for attorney’s fees in representing you before the IRS.
Finally, a skillful attorney can help you delay starting payments to the IRS for several months. During this time you can be making payments to your attorney.
Find a free consultation.
Take advantage of attorneys that offer a free consultation to evaluate your case. This allows you to wait to pay until you are convinced it is in your best interest to hire an attorney.
Are you are worried about the IRS levying your bank account or filing a federal tax lien against you?
Find out what you can do to avoid these IRS collection actions by scheduling a Free IRS Lien/Levy Strategy Session with Attorney Tony Ramos Today.