How Do Federal Tax Levies Work?
Remember that a tax lien is a legal claim against your property to secure payment of a tax debt. If you don’t pay or make arrangements to settle your tax debt, the IRS can levy, seize, and sell any type of real or personal property that you own or have an interest in.
If you’ve received a Final Notice of Intent to Levy (Notice 1058) from the IRS, you’re now on the clock. This is your last warning from the IRS before they start taking enforced collection actions by seizing your assets.
If you don’t act quickly, the IRS will take drastic measures to fulfill your unpaid liability. These actions include bank account levies, wage garnishments, accounts receivable levies, and property levies (to name just a few).
Even at this complex stage in the tax game, you still have options if you act within the given 30-day deadline. A licensed tax lawyer can help you make a plan of action. With proper representation from a licensed tax levy lawyer, you can minimize the financial damage. And, under the right circumstances, you can possibly avoid the tax levy altogether.
Boxelder Consulting knows how to navigate the IRS’s bureaucratic maze, and make the system work for you. Our team has years of experience negotiating installment agreements and levy releases directly with the IRS.
Don’t wait until it’s too late — you may qualify for an immediate tax levy release with the IRS. At Boxelder, we offer full-service tax levy release assistance to eligible taxpayers. Take the first step and call our office today for a free consultation.
Levy Red Flags: IRS Letters & Notices
The IRS is clear and concise in its letters and notifications. These notices will always arrive through the U.S. postal service mail. The IRS will never enact enforced collections without first communicating with the taxpayer.
Before an IRS bank levy or other enforced collections, the IRS will send a series of certified mail notices. Here’s what you need to know about the most common letters, notices, and forms the IRS sends throughout the levy process:
CP14 – Unpaid Taxes Warning Notice
This notice triggers the beginning stages of the IRS Collections Process. If you have received a CP14 notice from the IRS, it simply means that you owe money on taxes. The notice will explain how much you owe (with a due date) as well as instructions on how to pay the balance.
CP504 – Notice of Intent to Levy
A CP504 letter signals the IRS’s intent to levy your property, but it’s not the final notice. This IRS notice states that you need to pay the amount due immediately. If you don’t, the IRS will seize your state income tax refund and apply it to pay the amount you owe.
Letter 1058 (LT11) – Final Notice of Intent to Levy and Notice of Your Right to a Hearing
The IRS uses both LT11 and Letter 1058 to advise taxpayers that it intends to levy their property. These letters also state that the taxpayer has a right to file an appeal. LT11 is a shorter notice but the message (and the warning) is essentially the same.
If you don’t respond within 30 days from the date of the letter, the IRS can levy your assets. This includes salary, other income, bank accounts, personal and business property, state tax refunds, and even Social Security benefits. You do not want to ignore a notice of levy from the IRS.
Form 12153 – Request for a Collection Due Process (CDP) or Equivalent Hearing
If you disagree with the assessed amount, you can file a Form 12153. This form is your Request for a Collection Due Process or Equivalent Hearing. Letter 1058 gives information on how to exercise this option.
At this stage in the process, we highly recommend hiring representation. A tax levy attorney can negotiate directly with the IRS on your behalf, and help ensure the best outcome.
How Do I Get an IRS Bank Account Levy Released?
Once the IRS attaches a levy to your assets, the agency pull from these assets until you’ve cleared the tax debt. If you don’t have enough money to pay the debt in full, you still have options to remove this financial pressure.
A licensed tax lawyer can help you make sense of your options, and possibly get the IRS bank levy released. The route you choose is contingent upon your personal tax and financial situation. Below, you’ll find the most common solutions to get a levy released.
Pay the Debt in Full
The fastest way to get a tax levy released is to pay the total liability in full. Once you pay your tax debt in full, the IRS will immediately stop all collection activity. You’ll then receive Form 668–D, the IRS’s levy release form.
But, most taxpayers struggling with tax debt can’t afford to pay the liability in full. If you’re struggling to stay afloat, you can always consider payment plans or tax settlements as possible resolutions.
File an Offer in Compromise
An offer in compromise (OIC) allows taxpayers to settle their tax debt for less than what they owe. The IRS is generally reluctant to approve an offer in compromise. The taxpayer must demonstrate that full collection of the tax would create economic hardship. Otherwise, the IRS will still insist that you pay in full.
Filing an OIC requires a lot of paperwork and countless hours of back-and-forth communication to be successful. Since it takes time to process and review your offer, this option is not an immediate solution to lifting a tax levy.
Enter into an Installment Agreement
You can also secure a release of levy from the IRS by entering into a payment plan. An IRS payment plan is also called an installment agreement. First, file Form 9465 to begin the process. If your installment agreement is approved, the IRS will release all tax levies immediately.
As long as you continue to make timely monthly payments toward your liability, the IRS will not pursue collections. But, keep in mind that penalties and interests continue to accrue on your account when you enter into a payment plan.
Prove Undue Hardship
The IRS will also release a levy and pause collection activity if you can prove extreme financial hardship. Simply put, you must demonstrate that the levy would prevent you from meeting basic living expenses and necessities.
To prove financial hardship, you’ll need to provide the IRS with thorough documentation of your financial situation. If the agency approves your hardship request, the IRS will place your case in Currently Not Collectible (CNC) status. And with CNC status, the IRS will release any tax levy or lien on your account.
IRS Statute of Limitations’ Expiration
Under the statute of limitations, the IRS only has ten years to collect a tax debt before it expires. That means the IRS cannot legally collect on a debt that has reached the collection statute expiration date (CSED).
This resolution strategy might sound like an easy option, but waiting for a tax debt to expire comes with its own hurdles. The IRS keeps a close eye on cases approaching expiration dates. They will pursue aggressive collection action before the CSED passes.
File for Bankruptcy
A common misconception about bankruptcy is that it does not apply to tax debt. When you file for bankruptcy, the court system will issue a “stay.” This requires all creditors (including the IRS) to stop collection activity.
Since bankruptcy severely impacts your credit score, this route of resolution should be a last resort. Nonetheless, depending on the type of taxes you owe, and the bankruptcy chapter under which you filed, bankruptcy may represent your best option for clearing your tax debt.
Talk To A Tax Levy Attorney
As we’ve said, if you’ve received a Final Notice of Intent to Levy, the clock is ticking. You only have 30 days to minimize the financial damage and remove the tax levy altogether.
The best thing that you can do is contact a tax levy attorney. At Boxelder Consulting, our team has years of experience negotiating directly with the IRS on behalf of our clients. We’re here to provide compassionate IRS tax levy relief.
We employ Denver’s top levy removal experts, and can stop IRS tax levies quickly. Don’t wait until it’s too late — call our office today for a free consultation of your IRS issues.