How to Respond to a Notice of Intent to Levy: Necessary Tips

Receiving any notice in the mail from the IRS, much less one that incorporates a Notice of Intent to Levy, may be jolting for anyone. What this notice actually means is that the IRS intends to levy, otherwise known as seize, assets-which can be in the form of wages, bank accounts, or other property-against you to satisfy any back tax debt. But you are not required to panic. You can ward off major consequences and halt this situation through proper knowledge and acting in the nick of time. This article will explain what a Notice of Intent to Levy is triggered by, what you do if you receive one, and how you can avoid future collection actions from the IRS.

What Triggers a Notice of Intent to Levy?

The Notice of Intent to Levy is the usual course of action when the IRS perceives that one owes back taxes and the agency has not been paid or heard from. The IRS, before mailing the above notice, would have taken the following action:

  1. Unpaid Taxes Bill:
  2. The IRS first sends a bill for taxes owed, including penalties and interest.
  3. Failed to Receive Payment: If you make no arrangement to pay your tax due, or you ignore their contacts, the IRS will send more letters asking for your consideration of their plea.
  4. Levy-Notice of Intent: Before the actual levy, the IRS must send a final notice, Letter 1058 or Letter LT11, with an intent to levy. This can be mailed to you through an IRS-certified letter to give you at least 30 days to take action before the commencement of the levy.

The IRS is legally bound to provide you with time to respond before seizing any of your assets. For that reason, immediately upon receipt of this notice, it would be highly pertinent that you immediately take action.

What to Do Upon Receiving a Notice of Intent to Levy

When you obtain a Notice of Intent to Levy, here are the steps you want to take:

  1. Read the Letter Carefully-Stay Calm: The letter will explain the reason for the levy, the amount of tax owed, and the avenues available to you to prevent or stop the levy. Read every detail and make sure you understand it.
  2. Verify the Amount as Valid: Check the amount that you owe and then cross-check it with your tax records. Sometimes there may be errors, and the amount stated may not be correct. If you think this is the case, you must contact the IRS right away.
  3. Act Within the 30-Day Period: This is basically a notice giving you 30 days to act upon it before the beginning of the levy process. You can act during this time to approach a solution or appeal for the cessation of the levy.
  4. Contact the IRS: The letter carries contact information that you can use to call the IRS. You can make arrangements for a payment plan, ask for more time to pay, and look over other options for resolving tax debt.

Exploring Your Options for Resolving Your Tax Debt

There are several methods through which you can settle your tax debt and stop the levy on your account. Some of these options are described below:

  1. Installment Agreement: If you are unable to pay the full amount of your tax debt, the IRS may allow you to make a payment plan in which you will make monthly payments over a certain period of time.
  2. Offer in Compromise: You may pay less than what you owe in settlement if you qualify. You will have to provide financial details showing that it would be a financial burden if you try to pay the whole amount.
  3. Currently Not Collectible Status: If you are able to show that satisfaction of the tax liability would render you unable to pay necessary living expenses, the IRS may place your account in Currently Not Collectible status. Currently Not Collectible status is a temporary halt on IRS collection activity.
  4. Request a Short-Term Extension: For those qualified, the IRS may give you additional time to pay the debt in one lump sum and will not apply immediate collection measures.

Pursuing these alternatives will enable you to avoid the adverse consequences of the levy and likely reach a settlement of your tax liability that is manageable.

Appeal Your Notice of Intent to Levy

You can appeal a Notice of Intent to Levy if you believe that the levy is not justified or that you do not owe the amount on the notice. Here’s how:

  1. File an Appeal (CDP): This is one of the methods of appeal that can be filed within the 30-day period for the same levy. You can request a hearing with the IRS Office of Appeals and discuss your case with them. You may propose alternatives, like a payment plan or an Offer in Compromise during this hearing.
  2. Filing Form 12153: The taxpayer can use Form 12153, “Request for a Collection Due Process or Equivalent Hearing,” to request a CDP hearing. It is due within 30 days of the notice.
  3. Prepare for the Hearing: Gather all relevant documents that can help your cause, such as financial statements, proof of income, and tax returns. Be prepared to explain why the levy is unfair or why you are unable to pay due to financial troubles.

An appeal will halt the levy process while the IRS works on your case. Just don’t miss the deadlines and always provide correct information.

Consequences of Not Complying with a Notice of Intent to Levy

Failure to respond or pay heed to a Notice of Intent to Levy results in damaging consequences. After the expiration of the 30-day window, the IRS may execute the levy, including the following actions:

  1. Wage Garnishment: The IRS can request a percentage of your salary deducted and applied to your debt until paid.
  2. Bank Account Levy: The IRS can freeze your bank accounts and seize funds to pay your debt.
  3. Seizure of Property: The IRS can seize and sell your assets, such as your house, vehicle, or other valuable property.

Ignoring the notice could also result in additional penalties, interest, and fees, which will make resolving your tax debt even more difficult.

Avoiding Further IRS Collection Action

To avoid receiving another Notice of Intent to Levy or any other IRS collection action in the future, it’s essential to be proactive:

  1. Stay Current on Taxes: File returns on time and pay all taxes owed to avoid any future IRS problems.
  2. Make Early Payments: If you can’t pay your tax in full, know that it’s better to set up an installment agreement or another resolution early to avoid further IRS action.
  3. Communicate with the IRS: If you face financial problems, it’s better to approach the IRS and come up with a solution rather than waiting for their collection actions to escalate.
  4. Good Recordkeeping: Keep good tax records of all your documents that prove your payments, deductions, and income. This will help avoid misunderstandings with the IRS.

Conclusion

Although a Notice of Intent to Levy is a frightening letter to receive, there are several ways you can take immediate action to help you avoid serious consequences such as wage garnishment or asset seizure. You can resolve this issue without further complications by understanding what caused the notice, exploring your tax debt resolution options, and appealing the levy if necessary. Ignoring the notice can lead to significant financial trouble, but staying proactive can keep you on track and prevent future IRS collection actions.

Sharing Is Caring:

Leave a Comment