Intent to Levy

What is a Notice of Intent to Levy?

An intent to levy notice is one of several notices the IRS sends to a taxpayer if they plan on seizing the taxpayer’s assets. This notice should not come as a surprise; the IRS sends out multiple notices and bills before they start planning to levy your assets.

There are several different letters, all of which are called Notice of Intent to Levy. They include:

• CP504
• CP504B
• CP77

Each of these IRS notices contains basically the same information: the amount you owe in taxes, the amount you owe in penalties, the amount you owe in interest, your next steps if you agree or disagree with the amount due, and what will happen if you do not respond to the IRS.

Final Notice of Intent to Levy

After sending you multiple initial warnings that they plan on levying your assets, the IRS moves on to a Final Notice of Intent to Levy. These forms include Letter 1058, LT11, CP90, and CP297. 

What makes these notices different than the other levy notices is that they also include a Notice of Your Right to a Hearing. As a result, these notices fulfill the IRS’s legal requirement to provide taxpayers with at least 30 days of notice and information regarding their right to a hearing before they move forward with a levy. 

Once you receive a Final Notice of Intent to Levy and Notice of Your Right to a Hearing, the IRS only has to wait 30 days before they seize your assets. In contrast, if the IRS sends you an intent to levy notice that does not mention your right to a hearing, the agency may take your state or federal tax refunds, but they must send a Final Levy Notice before seizing other assets such as wages or bank account balance.

Types of Intent to Levy Notices

Why are there so many types of levy notices? The IRS sends slightly different notices when they plan on levying different types of assets—for example, they may send a different notice if they plan on seizing your home, garnishing your wages, or freezing your bank account. 

Notices other than the final notices are generally reserved for when the IRS plans to intercept your state tax refund. Additionally, there are different notices for individuals and businesses. CP504B and CP297, for example, are solely sent to businesses.

When you receive different levy notices, it is crucial to pay attention to the deadlines given within each notice. For example, you have 30 days to respond to a Final Levy notice, but if you get a notice that your bank account has been frozen, you only have 21 days to respond before the bank sends the funds to the IRS. 

Responding to a Notice of Intent to Levy

On each notice you receive from the IRS, you’ll find information on what you should do immediately after receiving the notice. Here’s an overview of the main options.

If You Agree With the Notice

If you’ve read through your Notice of Intent to Levy and you agree with the amount due, it’s time to make payment arrangements. People often ignore these letters because they cannot pay in full, and they assume that there’s no point in reaching out to the IRS until they can pay in full. 

But by the time you have that amount of money, the IRS may have already levied your assets. It is crucial that you either contact them directly or begin working with a tax attorney to prevent further collection actions. 

If You Disagree With the Notice

Perhaps you’ve read through the notice and the amount doesn’t seem right—either it doesn’t account for payments you’ve made or the amount seems higher than what you calculated on your own. In that case, you must contact the IRS or a tax attorney to dispute the amount owed. 

If you do not do so within 30 days of receiving the notice, the IRS will assume you agree with the amount they provided and move forward accordingly. Depending on your situation, you may be able to request an appeal under the Collection Appeals Program or the Collection Due Process Program.

Should You Request a Hearing?

If you receive a Final Notice of Intent to Levy that outlines your right to a hearing, should you request the hearing? A tax pro can let you know if a Collection Due Process hearing is the right option in your situation. 

A hearing is easy to request—simply follow the instructions in the notice or by filing Form 12153. During the hearing, you can explain why you don’t want your assets levied, but more importantly, you can talk with the IRS agent about payment options. Usually, this happens over the phone, and it’s relatively informal. 

If you haven’t had a chance to dispute your tax due, you can also do that at the CDP hearing. If you’ve already gone back and forth (for example, during an audit appeal), over the balance due, you won’t be able to dispute the tax debt during the hearing, but you will get the chance to talk about payment options. You can appeal in Tax Court if you don’t like the results of the CDP hearing.

Timeline of a Levy

While the Internal Revenue Code only states that the IRS must provide 30 days of notice before they levy your assets, the actual timeline is much longer. The IRS doesn’t just jump right into sending a Notice of Intent to Levy and then a Final Notice of Intent to Levy. 

In fact, before they take action against any of your assets, you should receive four to five notices in total. Each of these notices gives you 30 days to respond, pay in full, or make payment arrangements. The next notice is only sent out once that deadline passes. 

In reality, you generally have at least four to five months from the first notice you receive to the actual levy. These notices, in order, include:

• CP14
• CP501
• CP503
• CP504
• Letter 1058 or LT11

Once 30 days have passed from the date that the IRS sent you the final notice, they may levy your assets at any time. How long it actually takes depends on how much you owe, if your case has been assigned to a Revenue Officer yet, and how backed up the IRS is.

What Can the IRS Levy?

The IRS has broad legal authority to seize a range of assets to collect your past-due tax debt. Some of the assets they may take if you fail to pay include:

• State and federal tax refunds
• Retirement benefits
• Government benefits from the Office of Personnel Management
• Real estate
• Vehicles
• Personal property
• Money held in bank accounts
• Social Security benefits
• Your wages, with only a small portion left to cover your other expenses
• Commissions

How to Prevent a Levy

Preventing a levy due to unpaid taxes is fairly straightforward. The fastest option is to pay your tax debt in full, but for most taxpayers who have gotten to this point, that’s not a viable option. 

Even if you cannot pay your tax debt in its entirety, the IRS is likely to hold off on levying assets if you make other payment arrangements. They would rather receive payment over time than receive nothing—and they would generally rather receive payment from taxpayers directly, rather than taking it by force.

The IRS currently offers a variety of payment options to taxpayers who cannot pay their debt in full. The options that are available to you depend largely on your financial situation and how much debt you have. They include:

• Installment agreement: This option is the easiest and most convenient for many taxpayers. If your debt is low enough, you can apply online and get an immediate decision. It’s crucial to make sure you can genuinely afford the minimum monthly payment before you commit to an installment agreement—if the minimum payment is just barely within your budget, you run the risk of defaulting and ending up in poor standing with the IRS.
• Offer in compromise: The IRS allows a small portion of taxpayers to propose an offer in compromise. An offer in compromise takes into account your income, assets, equity, and household expenses to determine how much you can reasonably pay. You either pay in a lump sum or spread out your payments over up to 24 months. This is a fairly grueling process with a low acceptance rate, so it’s recommended that you discuss it with an attorney before jumping into the long application process.
• Partial payment installment agreement: Similar to an offer in compromise, a Partial Payment Installment Agreement is suitable for taxpayers with limited assets and income. The amount you pay is lower than the minimum monthly payment required for a regular installment agreement. Note that the IRS may periodically review your finances to determine if you are able to pay your tax debt in full.
• Currently not collectible: Often referred to as hardship status, currently not collectible status puts a temporary pause on all collection actions. You’ll have to fill out forms showing the IRS that you are unable to pay both your living expenses and your taxes without suffering serious financial hardship. This is not meant to be a permanent solution, as the IRS will check in on you occasionally to see if your circumstances have changed.

Throughout all of this, please remember how important it is to communicate with the IRS instead of ignoring the notices they send you. They are often open to payment arrangements, but until you let them know your situation, they have no idea whether or not you are incapable of paying or you are simply refusing to pay. The earlier in the process you begin working with the IRS, the easier it may be to set up a viable payment arrangement for your financial circumstances.

Communicating with the IRS on your own can be a dangerous proposition, though. The IRS agents, as nice as they may be, are not there to help you get the most affordable resolution available. Quite the opposite; their job is to figure out how to get you to pay as fast as possible, and saying the wrong thing to them could make it more difficult to get the result you want. This is why you should be represented by a tax professional with knowledge and experience in tax resolution.

Your Options After the IRS Levies Your Assets

If the IRS has already levied your assets, you may still be able to have the levy released. If you can prove that the levy is creating immediate economic hardship, the IRS may release it. 

However, you do have to prove that it’s actually making it impossible for you to pay your basic living expenses and provide for your family—not just that it’s inconvenient. The IRS may also be willing to release a levy if you contact them, either directly or through a tax professional, to set up a payment option that resolves your tax liability. 

When It’s Time to Reach Out to a Tax Pro

At any point in this process where you feel overwhelmed, it’s the right time to talk to a tax professional. Many people believe you don’t need to involve a tax attorney until you’re on the verge of losing everything—in fact, the earlier you involve a professional, the more time they have to assess your financial situation and find different solutions that may fit your needs.

Wherever you are in this journey, the team at McLaud Law P.C. is here to help you navigate your options, come up with a plan, and give you some peace of mind. Set up a consultation now by calling us at 585-397-7785 or contacting us online.

This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between McLaud Law P.C. and the recipient.