What to Expect if You Receive an IRS Final Notice of Intent to Levy
If you have unpaid taxes, the IRS will eventually send you a Final Notice: Notice of Intent to Levy and Notice of Your Right to a Hearing. This notice means that the IRS plans to start seizing wages, bank accounts, and other assets. You have 30 days to respond before the IRS moves forward with the levy.
The IRS offers many different options for people who can’t afford to pay their tax liabilities in full, but you have to contact the agency about these programs. If you don’t, the agency will enforce collection actions against you. To protect yourself, contact us for help today.
At the W Tax Group, we work closely with our clients to customize solutions that meet their unique needs. Don’t get lost working with a big tax relief firm. Instead, get the customized help and support you need by contacting our experienced tax attorneys today.
What Is an IRS Notice of Intent to Levy?
A notice of intent to levy means that the IRS plans to levy your assets. If you don’t respond to the notice within 30 days, the IRS will seize your assets, take the money in your bank account, or garnish your wages.
Do not ignore this notice. To protect your assets, bank accounts, and wages, you need to contact the IRS to make arrangements to pay your tax debt as soon as possible. Once the IRS starts the levy process, it can be very hard to stop — contact us now if you’re trying to stop a levy.
How Many Notices Does the IRS Send Before Levy?
Typically, the IRS sends about four notices before it levies your assets. However, the number can vary, and the agency only needs to send two notices. The law states that the IRS can only levy your property if it sends you a bill and a 30-day notice of intent to levy.
However, the IRS can levy your assets without sending you a 30-day notice in the following situations:
- If the tax collection is in jeopardy.
- If the IRS wants to levy an IRS or state income tax refund.
- If you have a disqualified employment levy. This applies if you owe employment taxes, and you’ve requested a Collection Due Process hearing on employment taxes in the last two years.
- If you’re a federal contractor. The IRS can issue federal contractor levies automatically through the Federal Payment Levy Program.
A lot of IRS notices sound threatening, but with the early notices, you still have plenty of time to take action. Once you receive the levy notice, the IRS is serious. If you fail to respond to this notice, the IRS will start seizing your assets.
Types of Intent to Levy Notices
The IRS sends out several different types of levy notices. In some cases, you may receive a general notice warning you of the IRS’s intent to levy your assets. In other cases, the notice may specifically state the assets the IRS plans to levy. Here are the different titles the IRS puts on levy notices:
- Final Notice—Notice of Intent to Levy and Notice of Your Right to a Hearing
- Notice of Jeopardy Levy and Right of Appeal
- Notice of Levy on Your State Tax Refund—Notice of Your Right to a Hearing
- Notice of Levy and of Your Right to a Hearing
Again, the IRS doesn’t have to give you advance warning to seize your tax refund or if the collection is in jeopardy. If you receive a notice about those types of levies, there will not be a deadline. In most other cases, you have 30 days to respond. The IRS uses a variety of levy notices, including the following:
- IRS CP90 – This outlines the IRS’s intent to levy and your rights to a hearing.
- CP91 — The IRS sends this notice when it intends to levy your Social Security benefits.
- CP298 — In some cases, you may receive this notice about a Social Security levy.
- CP297 — The IRS sends this levy notice to businesses. It says the agency may levy business assets, bank accounts, and third-party payments if you don’t respond in 30 days.
- CP297a — If you receive this notice, the IRS may already be levying federal contractor payments owed to you as well as federal reimbursements and retirement funds. The IRS doesn’t need to provide you 30-day notice for levying these types of assets.
- CP504 — This intent to levy notice comes from the automated collection system. It gives you 30 days to respond, or the IRS will levy your assets.
- CP504B — This is just like the CP504, but it’s for business taxpayers.
- LT1058 — You may receive this intent to levy notice if a revenue officer has been assigned to your account.
- LT11 — This intent to levy notice generally comes from the automated collection system (ACS).
- Form 668-W — The IRS sends this form to your employer when it garnishes your wages. You will receive a notice 30 days before the IRS sends this notice to your employer.
How to Avoid a Tax Levy — If You Agree With the Tax Debt
If you agree with the tax debt shown on the notice, there are several steps you can take to prevent the levy from moving forward. Here are the main options:
If you owe less than $50,000 in tax, interest, and penalties, you can apply for a monthly payment plan online. As long as you are compliant with filing obligations from other tax periods and can afford to pay off the balance in six years, the IRS will generally accept your request.
If you owe more than $50,000 or can’t pay off the tax bill by the collection statute expiration date, you will have to jump through more hoops to get a payment plan. However, it’s still possible.
Offer in compromise
The IRS may be willing to settle your tax debt for less than you owe if you prove that you cannot pay the full balance. To qualify, you have to provide the IRS will detailed information about your income and assets.
Partial payment installment agreement
This is a hybrid between a payment plan and an offer in compromise. The IRS lets you make monthly payments until the collection statute expiration date, and then, the IRS settles the remaining amount of the tax debt. You must submit a statement of financial condition when you apply, and if your finances improve while you’re still making payments, the IRS may demand the full balance.
If you can prove that requiring you to pay the tax debt will cause economic hardship, the IRS will temporarily stop collection actions against you.
Applying for any of these programs will stop the levy from moving forward as long as you make your request by the 30-day deadline noted in the letter. In most cases, the IRS cannot levy your assets while it is reviewing your request for a relief program.
What to Do If You Disagree With the Notice of IRS Levy
If you disagree with the tax liability or with the proposed levy, you have a few different options. For best results, you should have a tax attorney help with the following:
You can appeal the tax liability shown on the notice if you believe that it is incorrect. You can also appeal the proposed levy. The intent-to-levy notice outlines your right to request a due process hearing. As long as you request the hearing within 30 days of the date on the notice, the IRS will not move forward with the levy.
If you miss the deadline, the IRS will move forward with the levy, but you still have the right to request an equivalent hearing. To appeal, file Form 12153 (Request for a Collection Due Process or Equivalent Hearing) or write a letter with the same information on the form.
Innocent Spouse Relief
If you believe that the tax liability is due exclusively to your spouse or ex-spouse’s actions, you can apply for innocent spouse relief. This program has very specific eligibility criteria, but if you qualify, you will only be responsible for your portion of the tax liability.
Offer in Compromise Based on Doubt as to Liability
There is also a program called offer in compromise based on doubt as to liability. The application process requires detailed knowledge of the tax code, so you should work with a tax professional. If you qualify, the IRS will reduce your tax debt.
This is different than a traditional offer in compromise. With the standard program, you prove that you can’t afford to pay the full bill, and the IRS lets you settle. With this variation, the IRS settles the bill when you establish that you’re unlikely to owe the full amount.
How to Appeal an IRS Tax Levy
The Collections Appeals Program gives you the right to appeal levies or other collection actions if you disagree. You can only appeal one levy and one lien for each tax period.
You can ask for a managerial review if you disagree with a proposed levy. You have 10 days if the IRS has issued a notice of seizure for your home, car, or other property, If you’re dealing with a bank or wage levy, there is no time limit to appeal, but if you don’t make your request in a timely fashion, the IRS will move forward with the levy.
If you disagree with the manager’s decision or if a manager never gets in touch with you, file Form 9423 (Collection Appeals Request). Unfortunately, if you don’t agree with the collection appeals decision, you don’t have the right to a further appeal. You only get one chance which makes it critical to work with a tax professional.
Tax Levy Vs. Federal Tax Lien
Tax levies are more serious than tax liens. A lien secures the IRS’s interest in your assets. By issuing a lien, the IRS is essentially letting the world know that you owe money to the federal government. If you sell your assets, the IRS has the right to the proceeds.
In contrast, a levy is when the IRS takes your assets. The IRS may seize the money in your bank account, garnish your wages, or take your assets.
What Property Can the IRS Levy?
The IRS can levy almost anything that you own or money that other people pay to you. A few assets and income sources are exempt from tax levies, but the IRS can levy the following:
- Wages, salaries, and commissions — The IRS can issue a continuous levy that stays in place until the balance is paid in full or you make arrangements to stop the levy.
- Dividends and payments on promissory notes — The levy applies to the payments due and the right to future payments as of the date on the levy.
- Bank accounts — The IRS can levy all of the money in your bank account up to the balance of your tax debt, penalties, and interest. Once the bank receives the levy notice, it holds the funds for 21 days. If the funds in your account don’t belong to you, you need to dispute the levy before the 21 days are up. Otherwise, the bank will send the funds to the IRS.
- Retirement accounts — If you have unpaid taxes, the IRS can levy IRAs, 401(k)’s, and other retirement accounts.
- Social Security payments — Through the Federal Payment Levy Program, the IRS can seize up to 15% of Old Age and Survivor’s Social Security benefits. The IRS can also manually levy Social Security payments.
- Federal vendor payments — If you’re a government vendor for property, goods, or services, the IRS can levy 100% of your payments.
- Homes, cars, and other property — The IRS can even take your home, cars, and other real and personal property.
The IRS cannot levy unemployment benefits, certain annuity and pension benefits, service-connected disability payments, worker’s compensation, or certain public assistance payments. Additionally, if the IRS levies your wages, it must leave you an exempt amount plus any income that you use to pay for court-ordered child support.
Get Help From a Tax Attorney
If you’re facing an IRS tax levy, our tax attorneys can help you. We work closely with our clients to help them avoid IRS levies and find relief for their delinquent tax debt. We can help you apply for penalty relief and find the best resolution option for your tax bill.
To learn more, contact us today. We’ll start with a free consultation. This gives us a chance to learn more about your situation, and it gives you a chance to decide if we’re a good fit for your needs. Then, we’ll help you get relief from your tax debt.