IRS Notice of Intent to Levy: What It Is and What to Do

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Did you recently receive a Notice of Intent to Levy from the Internal Revenue Service (IRS)? It’s certainly not a piece of mail anyone looks forward to receiving. However, there are steps you can take to potentially remedy the situation upon receiving this IRS notice.

The IRS extends relief options to qualified taxpayers and businesses. You can also hire a tax relief firm to help you determine the next steps.

What Is a Levy?

A levy refers to the seizure of your assets to resolve unpaid debts. Typical targets for seizure include your bank accounts, retirement accounts, wages, independent contractor income or accounts receivables, if you have a small business. The IRS may also seize property. The IRS must take specific steps before they can take action, though, which could buy you more time to figure out the next steps.

What is a Notice of Intent to Levy?

Taxpayers who owe federal back taxes and haven’t worked with the IRS to find a solution could receive a Notice of Intent to Levy. It’s a document that communicates the IRS’ plans to confiscate funds or assets to cover unpaid tax debt. The Notice of Intent to Levy also outlines why the IRS is planning to levy assets or garnish wages, how the process works and how to file an appeal if you think they have not followed proper procedure.

Federal law requires correspondence to be sent to the taxpayer at least 30 days before the planned seizure. The following are some of the most typical forms the IRS would send via U.S. Mail:

  • CP504 (Notice of Intent to Seize (Levy) Your Property or Rights to Property)
  • CP90 (Intent to Seize Your Assets and Notice of Your Right to a Hearing)
  • 1058 (Final Notice of Intent to Levy sent by a Revenue Officer)
  • LT11 ((Final Notice of Intent to Levy sent by Automated Collections)

Fortunately, there are ways to avoid a levy or garnishment. You can file your returns and make tax payments in a timely manner or request an extension if you need additional time. The IRS also offers installment agreements to help you resolve outstanding tax debt. Or you can work with a tax relief firm to apply for an Offer in Compromise (OIC), which may allow you to settle your tax debt for a fraction of what you owe.

Which Assets Can the IRS Levy?

The IRS can levy just about all your assets, including: 

  • Automobiles 
  • Bank accounts
  • Commissions
  • Compensation from employers (including wages
  • Social Security benefits (up to 15%)
  • Employee travel advances
  • Vendor and contractor payments 
  • Residential and commercial property 
  • Retirement benefits (including federal government retirement benefits distributed by the Office of Personnel Management) 

Refer to IRS Publication 1494 to determine the amount of income that could be exempt from levy on wages, salary, and other income. But keep in mind that the IRS can seize a sizable amount of your assets and leave you with the bare minimum.

What Happens if You Don’t Pay Your Tax Debt After a Notice of Intent to Levy?

If you fail to reach out to make formal payment arrangements or file the proper appeal, the IRS could move forward with seizing your assets. Generally, you have 30 days from the date on the letter to rectify the situation before the IRS takes action and should consider hiring a tax relief professional to help you understand what options could be available to you. 

What Do You Do If You Receive a Notice of Levy?

You can pay what you owe in full to stop IRS collection activities and prevent the seizure of your assets. But if you can’t afford to repay your outstanding tax liability all at once, these options could be available to you: 

Offer in Compromise 

The IRS could agree to settle your tax liability for a fraction of what you owe through an Offer in Compromise. However, your chances of success are slim as the IRS only approves a small percentage of the OIC applications they receive each year. 

Installment Agreement

An installment agreement lets you make payments towards your balance over a set period. Here are your options: 

  • Long-Term Payment Plans: 
    • Individuals who owe $25,000 or less could be eligible for a 60-month installment agreement if they meet certain criteria
    • Individuals who owe $50,000 or less could be eligible for a 72-month installment agreement if they meet certain criteria 
    • Businesses that owe $25,000 or less could be eligible for a 24-month installment agreement if they owe $25,000 federal tax
  • Extended-Term Payment Plan: This arrangement is determined by your income, liabilities, and expenses the IRS classifies as allowable per the national standards of living. The terms are generally negotiated for you by a tax relief firm.

You should also have filed all required returns and be current on estimated tax deposits (if self-employed) before applying for an installment agreement. 

Innocent Spouse Relief

Are you on the hook for federal tax debt incurred by your current or former spouse? Consider filing Innocent Spouse Relief if you filed a joint tax return and weren’t aware the tax liability was underpaid, or in situations of spousal abuse or forgery on tax returns.

Currently Not Collectible (CNC) Status

CNC Status is available to taxpayers dealing with financial hardship. It allows you to defer making tax payments until your financial situation improves, but you’ll need to contact the IRS to plead your case. They will review your financial situation by analyzing your monthly income, expenses, and assets to determine if you’re able to pay. The IRS could also request documentation and a Form 433A or B and copies of your pay stubs and bills to substantiate the financial information you provided when requesting CNC status. 

If approved for CNC status as an individual taxpayer, the IRS may review your financial situation every two years to determine if you can afford to make tax payments, and every year if you have a business in CNC.

Getting Professional Help

If you receive a Notice of Intent to Levy from the IRS, it’s best to seek professional help. A reputable tax relief services firm, like Larson Tax Relief, can assist you with the next steps to find relief. Their team of experts will review your options or file an appeal if you feel certain procedures have not been followed, need protection, or believe there is a discrepancy between what the IRS says you owe and what you actually owe. 

Give Larson Tax Relief a call at 833-833-4151 or submit a request online for a free evaluation.

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