Category Archives: Tax Levy

Are You Receiving the Proper Notices?

Before the IRS is able to issue a levy against you individually or against your business, it is required to provide you with the proper notices. But how can you be sure that you are receiving all of the correct notices up until this point? The IRS typically starts with a notice telling you there is a balance due on the particular return you filed and then progresses to a “Final Notice of Intent to Levy.” A taxpayer has 30 days from the date of this letter to either fully pay the liability or take some sort of action on the account. Otherwise, the IRS can issue a levy.

Whether you are dealing with the Automated Collection Division of the IRS or local revenue officers, they are for the most part issuing the proper notices before taking any type of action.  However, there is one specific area where notices aren’t always being properly issued.  According to the Treasury Inspector General for Tax Administration (TIGTA) this is happening when there is an additional tax assessment.

When it comes to an additional tax assessment, a completely new notice should go out, giving the taxpayer an additional 30 days before any type of levy action can occur for that particular period. Even if the taxpayer had received the final notice previously and 30 days had run by, once the additional assessment takes place the new notice trumps the old one and the 30 days would start over again. It’s important to point out that the new notice would only be for the particular period in which the additional tax assessment took place. If you owed for multiple periods, the IRS could still levy on the periods that did not receive the additional assessment.

Should the IRS ever issue a levy against you or your business on a period with an additional tax assessment and it either didn’t give you the proper additional notice or didn’t wait the statutory required 30 days, there are steps you can take to fight back and get that levy released. The good news is that the IRS is aware that it isn’t always following procedure when it comes to additional assessments and it is taking the necessary steps to correct the problem. Nevertheless, at the end of the day, it’s always important to know and understand your rights as a taxpayer. We can help.

If you own a business and are facing tax troubles, learn more about IRS levies here. Or, if you are an individual with a tax liability, you can learn more about IRS levies here.

 

 

 

Final Notice, Notice of Intent to Levy

For some taxpayers the regular notices the IRS sends out about a balance due serve merely as a reminder or even nuisance about an unpaid tax. And there are other taxpayers that interpret even the tamest IRS collection notice as a threat of enforcement. In fact, both interpretations of the IRS collection notices probably have some truth. What is important is to know which letters are the most important and why.

In this piece I want to highlight what I believe to be the most important letter in the IRS collection process, Letter 1058. This letter is titled very specifically Final Notice, Notice of Intent to levy and Notice of Your Right to a Hearing. The exact same message and rights can be presented as an LT 11, CP 297 and CP 90.

I refer to the Letter 1058 (as well as the above-referenced notices) as the Final Notice. The Final Notice is a critical step in the collection process because it presents for the first the IRS’ right to take enforcement action such as the levying or accounts.

The Final Notice offers a taxpayer 30 days to file a Request for Collection Due Process or Equivalent Hearing (CDP), Form 12153. That appeal gives the opportunity to discuss collection alternatives with the Appeals Division of the IRS. If a taxpayer or its representative fails to file an appeal the IRS will have the right to take enforcement 45 days from the date of the letter. The 45 days allows additional time for the mailing of an appeal executed timely on the 30th day.

Despite the upside that may come from filing the appeal mentioned above it may not necessarily be the most appropriate action. The filing of an appeal in response to a 1058 will stay certain statutes of limitation relating to bankruptcy and collection. Furthermore, it could create a situation in which a business taxpayer is even more vulnerable to enforcement like in the case of a Disqualified Employment Tax Levy. And finally, the filing of an appeal may simply delay a case that could be resolved another way as it winds it way through the appeals process.

Above all Letter 1058 or the like cannot be ignored. If a taxpayer or its representative receives this letter it is important to immediately consider where the case stands. Thought should be given to the pros and cons of filing an appeal and contact should be made with the collection representative that issued the letter.

How to Release Wage Garnishment

A wage garnishment (also known as a levy on wages/income, or wage execution) means that a portion of your salary will be sent by your employer straight to the taxing authorities. This is one method that the IRS and State authorities have to enforce collection of the debt. Ideally, you would resolve the situation before this happens, but it is possible to release a wage garnishment even after it is in place.

First of all, it is important to know that the government is not allowed to issue a Levy on Wages without notifying you about the possibility of this action. The document used by the IRS for this purpose is called “Final Notice of Intent to Levy”; your State Department of Revenue may use another name, for example Tax (or Wage) Warrant. It is important not to ignore this letter, because it includes information about your rights as a taxpayer to file an appeal and, therefore, to put a hold on enforced collection activities.

If you already missed your timeframe to file an appeal, but have not received an actual Notice of Levy, contact your employer to take a closer look at your W4 form. You need to make sure that you correctly listed all exemptions for you and your dependents. This will help you to save some money when a Notice of Levy on Wages is issued. By law, a certain amount of your salary has to remain untouched so that you and your dependents can have the necessary minimum to live on. To calculate this amount, the IRS uses the number of exemptions listed on your W4 form and Tables for Figuring Amount Exempt from the Levy on Wages – these are revised every year.

Entering into a Payment Plan (Installment Agreement) with the IRS or State Department of Revenue before a Wage Garnishment is issued is one way to resolve the situation. However, if you were not able to reach this agreement prior to receiving a Notice of Levy on Wages, you can still do so now. All cases are different. Depending on the amount of your debt, you might be able to either set up a Streamline Installment Agreement that does not require any financial disclosure and lengthy negotiations, or you might apply for a Partial Payment plan by completing financial statement (form 433A for the IRS) and supporting it with a detailed proof of your income and expenses. These are just two examples of tax debt settlement, but there are also other ways to take care of your liability. Which resolution option is best depends on the specifics of your situation. The main point is that entering into a repayment agreement with the taxing authorities will automatically release your Wage Garnishment.

What if your financial situation is so bad that you simply cannot wait for the IRS or the State to review your payment plan request, and need to have a garnishment to be released immediately? It may still be possible, but you need to be ready to provide proof of your expenses, and to show that the levy on wages creates economic hardship for you and your dependents. For this purpose, the IRS uses the same financial statement, form 433A. If you have a state tax debt, the best way to find the correct document is to contact the person assigned to your case.

If your wage garnishment is released due to the economic hardship and your difficult financial situation, you might also use this opportunity and ask to put your case on Currently Non Collectible status until your condition improves.

If you would like some additional help and advice on what to do about an existing wage garnishment or Notice of Levy, feel free to call 20/20 Tax Resolution for a free consultation.

What if you ignore the IRS Final Notice of Intent to Levy?

The IRS Final Notice of Intent to Levy is an official document that federal tax authorities issue in order to give you a warning that they are going to start enforced collection activity of your past due liability. This letter is usually sent via certified mail and requires your immediate attention, even if you believe that you do not owe money to the IRS.

The IRS gives you 30 days from the day when the Final Notice was issued to respond to it. If you do not owe any money to the IRS, you still need to call the number listed on this notice and discuss the matter with the IRS representative. If you have a debt, but believe that the amount listed on the Final Notice is incorrect, you can file an appeal request using the enclosed form 12153, Request for a Collection Due Process or Equivalent Hearing. You can also file this request if you wish to resolve your liability with the IRS, but need a little bit more time than 30 days to be able to do that.

If you ignored the Final Notice of Intent to Levy and missed the 30 days period to exercise your appeal rights, the IRS can start enforced collections. This may include bank levies, wage garnishment, levies of Accounts Receivable, and seizure of property. An IRS bank levy is usually a one-day event. In other words, when the Notice of Levy is received by your bank, the bank has to freeze the money you had in your account on that day and send this amount to the IRS. This does not apply to the money you receive any time after the levy. So, if you ignored the Final Notice of Intent to Levy, be aware that you might lose money from your bank accounts.

While it is possible to minimize the damage made to your financial situation by the IRS bank levy, the Levy on Wages, or the IRS Wage Garnishment, is not an easy thing to avoid. If the IRS sends a Levy on Wages notice to your employer, your next paycheck will be significantly lower than you expect. This will continue until your IRS debt is paid in full, or until you set up a repayment option with federal taxing authorities. In some cases it is possible to release a Wage Garnishment, but this is a complex issue and is best done with the help of a tax debt professional.

If you did not respond to the IRS Final Notice of Intent to Levy on time and became a victim of enforced collections, the best thing to do is to arrange an alternative repayment option with the IRS. It can be done by either contacting the department that issued this notice, or by filing form 12153 – Request for a Collection Due Process or Equivalent Hearing mentioned above. Although filing this form after the 30 days period does not stop collection actions, it still gives you the right for an Equivalent Hearing, which you can use to discuss your problem with the IRS Appeals Officer and negotiate a manageable payment plan. If you cannot afford to make any payments to the IRS for your past due taxes, you might be placed on Currently Non Collectible Status.