What is an IRS Tax Levy?
Probably the most frequent reason that I have clients come into my Richardson, TX office related to IRS debt are when they are levied by the IRS. An IRS levy permits the IRS to legally seize the taxpayer’s property, including garnishing wages, taking money from bank accounts or other financial accounts, as well as seizing real estate, vehicles and other personal property to satisfy a tax debt. As you can imagine, this is a powerful tool at the disposal of the IRS and is often why taxpayers end up in our tax office.
When does the IRS Levy a Taxpayer?
Contrary to some popular thought, the IRS cannot simply levy a taxpayer at their whim. The process leading up to a levy is:
- The tax return is filed and the tax is assessed.
- An initial notice goes out notifying the taxpayer of the tax owed.
- Several additional notices are sent to the taxpayer, each increasingly more serious in tone.
- Eventually, the IRS sends the Taxpayer a Final Notice of Intent to Levy. This is often IRS Letter 1058 or LT11.
- The Final Notices will give the Taxpayer 30 days to respond. If the deadline is missed, the IRS can now levy the Taxpayer.
How Can a Taxpayer Stop a Levy?
The key to a stopping a levy is to respond to the IRS and attempt to resolve the issue. The Taxpayer will receive several notices over several months where addressing the issue, along with an effective solution, with the IRS can bring the process to an end.
If the Taxpayer gets to a point where the Final Notice of Intent to Levy is received, as part of that notice, the Taxpayer is also given Notice of their right to a Collection Due Process (CDP) Hearing. I’ve covered CDP rights in other articles, but one of the benefits of requesting the Hearing, is that collection ceases (including the Levy) until the hearing is completed. I recommend that a taxpayer in IRS Collections, always their CDP rights.
Once in communication with IRS Collections, in order to resolve the tax debt with the IRS, the Taxpayer will need request a resolution alternative:
- Enter into a payment plan to pay down their debt,
- File an Offer-In-Compromise where the IRS agrees a settlement for less than the full debt amount,
- Being categorized as Currently Not Collectible, or
- Eliminating the Debt as part of Bankruptcy if it qualifies.
Do You Need Help?
If you need help with an IRS Levy or other IRS Collection issue, we’d be happy to meet with you. Please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.
