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, the most important thing for you to know is that you’re on the clock. This is your last warning from the IRS before they start taking enforced collection actions by seizing your assets.
To put it simply, if you don’t act quickly, the IRS will take drastic measures to fulfill your unpaid liability. These actions usually come in the form of 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. Talk to a licensed tax lawyer to make a plan of action. It’s important to know your rights. With proper support and representation from a team of licensed professionals, it’s possible to minimize the financial damage and even avoid the tax levy altogether.
Boxelder Consulting knows how to navigate the bureaucratic maze of the Internal Revenue Service 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 – which are always sent by U.S. postal service mail. Prior to enforced collections, the IRS will communicate with the taxpayer by sending a series of notices via certified mail. 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
An intent to levy, but it’s not the final notice. If you do not pay the amount due immediately, the IRS will seize your state income tax refund and apply it to pay the amount you owe.
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 and that they have 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, such as salary and other income, bank accounts, personal and business property, state tax refunds, and even Social Security benefits.
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- Request for a Collection Due Process or Equivalent Hearing. Information on how to exercise this option can be found in Letter 1058. At this stage in the process, we highly recommend hiring representation and tagging in a tax lawyer who can negotiate directly with the IRS on your behalf.
How Do I Get an IRS Levy Released?
Once the IRS attaches a levy to your assets, the agency will continue to pull from these assets until the tax debt is fully paid. If you don’t have enough money to pay the debt in full, you still have several options to remove this financial pressure and get the 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. It’s safe to say, however, that many people fall into tax debt because they can’t afford to pay the liability in the first place. 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 and, on the rare occasion that it does, the taxpayer must demonstrate that collection of the tax would create economic hardship.
Filing an OIC requires a lot of paperwork and countless hours of back-and-forth communication to be successful. Since it takes time for the IRS to process and review your offer, this option is not an immediate solution to lifting a tax levy once it is in place.
Enter into an Installment Agreement
You may also choose to enter into an IRS payment plan by filing Form 9465 and negotiating an installment agreement. If this avenue of resolution is approved, all tax levies will be released immediately. As long as you continue to make timely monthly payments toward your liability, you’ll stay in good standing with the IRS and avoid future collection activity. Keep in mind, however, that penalties and interests continue to accrue on the account when you enter into an installment 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. In order 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, your case will be placed in Currently Not Collectible (CNC) status and the liens on your account will be removed.
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 and 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, a “stay” is issued by the court system, requiring 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.
As we’ve said, at this daunting stage in the tax game, the clock is ticking. You only have 30 days to minimize the financial damage and remove the tax levy altogether.
Luckily, this is what we do. At Boxelder Consulting, our team has years of experience negotiating directly with the IRS, and providing 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.