Receiving letters from the IRS is easy to put off, particularly when you already know that you owe back taxes and do not have the money to pay the balance in full.
But there is one type of IRS notice you should not ignore: a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
If the IRS has reached this stage of the collection process, your tax problem has become considerably more serious. The IRS may be preparing to use its administrative collection powers to take money or property to satisfy your unpaid tax debt.
That can include levying your bank account, garnishing your wages, or seizing other property.
The good news is that receiving a final levy notice does not necessarily mean it is too late to resolve the problem. However, important deadlines may apply, and waiting can significantly reduce your options.
What Is an IRS Tax Levy?
An IRS levy is not simply another collection letter.
A levy is the legal seizure of property to satisfy an unpaid tax debt.
Depending upon the circumstances, the IRS can potentially levy or seize:
- Money in your bank accounts
- Wages and other income
- Certain retirement income
- Social Security benefits
- Accounts receivable
- Business assets
- Vehicles
- Real estate
- Other personal property
This is different from a federal tax lien.
A tax lien is the government’s legal claim against your property resulting from unpaid federal taxes. A tax levy, by contrast, actually takes property or money to satisfy the debt.
That distinction is important. A levy means the IRS has moved beyond asserting its rights as a creditor and is using its collection authority against your assets or income.
What Is a Final Notice of Intent to Levy?
The IRS generally cannot simply levy your property without first following required collection procedures.
Before many levy actions, the IRS must provide notice of its intent to levy and provide the taxpayer an opportunity to request a hearing.
Taxpayers may encounter notices or letters such as:
- LT11 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing
- Letter 1058 – Final Notice, Reply Within 30 Days
- CP90 – Final Notice, Notice of Intent to Levy and Notice of Your Right to a Collection Due Process Hearing
- Other IRS notices advising of an intent to levy or collection rights
If you receive one of these notices, do not assume it is simply another routine IRS collection letter.
The particular notice you received, the date it was issued, the tax periods involved, and the procedural history of your case can all be important.
The 30-Day Deadline Can Be Extremely Important
Certain Final Notices of Intent to Levy provide the taxpayer with the right to request a Collection Due Process (CDP) hearing with the IRS Independent Office of Appeals.
Generally, a taxpayer has 30 days from the date of the qualifying notice to timely request the hearing.
That deadline matters.
A timely Collection Due Process request can provide an opportunity to have the proposed collection action reviewed by IRS Appeals and, depending upon the circumstances, to propose an alternative method of resolving the tax debt.
Potential collection alternatives may include:
- An Installment Agreement
- An Offer in Compromise
- A Partial Payment Installment Agreement
- Currently Not Collectible status
- Other appropriate collection alternatives
Depending upon the facts of the case, other issues may also be raised during the appeal.
A timely CDP request can also provide important procedural protections while the matter is being considered.
If you receive a final levy notice, do not wait until the last few days of the deadline to seek help.
Can the IRS Take Money From My Bank Account?
Yes.
An IRS bank levy can require your financial institution to freeze funds in an account up to the amount of the levy.
This can create an immediate financial crisis, particularly when the account contains money needed for a mortgage or rent payment, utilities, payroll, business expenses, or ordinary household necessities.
There are procedures associated with a bank levy before funds are ultimately remitted to the IRS, which can sometimes provide a limited opportunity to address the levy. But taxpayers should not rely on being able to fix the problem after the levy occurs.
It is generally much better to address the IRS collection problem before the money is taken.
Can the IRS Garnish My Wages?
Yes.
A federal tax levy can also attach to wages.
Unlike many one-time bank levies, a wage levy can have a continuing effect. Part of the taxpayer’s wages can continue to be sent to the IRS each pay period until the levy is released, the liability is satisfied, or another arrangement is made.
For someone who depends upon each paycheck to meet normal household expenses, a wage levy can create an immediate financial hardship.
It can also be embarrassing and disruptive because the employer becomes involved in complying with the IRS levy.
Can the IRS Seize My House, Car or Other Property?
The IRS’s levy authority extends beyond bank accounts and wages.
Depending upon the circumstances and applicable legal restrictions, the IRS can seize and sell certain real and personal property to satisfy federal tax liabilities.
That can potentially include vehicles, business property, and real estate.
Actual seizure of physical property involves additional considerations and procedures, and not every delinquent taxpayer is going to have a home or vehicle seized.
Nevertheless, taxpayers should understand the seriousness of allowing an IRS collection matter to progress without addressing it.
What If I Cannot Afford to Pay the IRS?
One of the biggest mistakes taxpayers make is assuming there is no point in responding to an IRS levy notice because they cannot afford to pay the balance in full.
You do not necessarily have to pay the entire tax debt immediately to resolve an IRS collection problem.
Depending upon your financial circumstances, possible solutions can include:
Installment Agreement
An installment agreement may allow you to resolve the collection problem through monthly payments rather than paying the entire balance immediately.
Offer in Compromise
If you qualify, an Offer in Compromise may allow you to settle your IRS tax debt for less than the full amount owed.
Partial Payment Installment Agreement
For some taxpayers who cannot afford to fully pay their tax debt within the applicable collection period, a Partial Payment Installment Agreement may provide another option.
Currently Not Collectible Status
If paying the IRS would prevent you from meeting necessary living expenses, you may qualify to have your account placed into Currently Not Collectible status based upon financial hardship.
Penalty Abatement
In appropriate cases, taxpayers may also qualify to have certain IRS penalties reduced or removed.
The appropriate resolution depends upon much more than the amount of tax you owe. Your income, household expenses, assets, equity, tax compliance, collection history, and the age of the tax liabilities can all affect the strategy.
Can an IRS Levy Be Released?
Under certain circumstances, yes.
The IRS may release a levy when specific legal requirements are satisfied. For example, a levy may be released when an appropriate installment agreement is established or when the IRS determines that the levy is creating an immediate economic hardship.
But getting a levy released does not eliminate the underlying tax debt.
Even after stopping or releasing a levy, the taxpayer generally still needs a strategy for resolving the outstanding liability. Otherwise, the collection problem may return.
Don’t Wait Until Your Bank Account Is Frozen
Taxpayers sometimes contact a tax attorney only after discovering that their bank account has been levied or their employer has received a wage levy.
At that point, the situation is considerably more urgent.
If you have already received an LT11, Letter 1058, CP90, Final Notice of Intent to Levy, or another serious IRS collection notice, there may still be time to address the problem before enforced collection occurs.
The earlier the situation is evaluated, the more opportunity there may be to determine which resolution options are available and take appropriate action.
Indiana Tax Attorney for IRS Levies and Back Tax Problems
I am Eric C. Keuling, founder of the Keuling Law Firm, and I have more than 18 years of tax and tax-resolution experience. I represent individuals and businesses throughout Indiana in IRS and Indiana Department of Revenue tax collection and tax-resolution matters.
My tax practice includes matters involving:
- IRS back taxes
- Final Notices of Intent to Levy
- Bank levies
- Wage garnishments
- Federal tax liens
- IRS Revenue Officer cases
- Collection Due Process matters
- Installment Agreements
- Offers in Compromise
- Partial Payment Installment Agreements
- Currently Not Collectible status
- Penalty abatement
- Unfiled and delinquent tax returns
- Payroll and employment tax liabilities
If you have received a Final Notice of Intent to Levy or believe the IRS may be preparing to levy your wages, bank accounts, or other assets, do not ignore the notice and assume you can deal with it later.
Important deadlines may already be running.
Contact the Keuling Law Firm to schedule a consultation. I can review the IRS notices and account history, explain the collection risks and available options, and develop a strategy for addressing the tax debt before the situation becomes more serious.
This article is provided for general informational purposes only and does not constitute legal or tax advice. IRS collection rights and deadlines depend upon the particular notice, tax periods, procedural history, and circumstances of each taxpayer.