IRS Notice of Intent to Levy: What it Means, What to Do
How Many Notices the IRS Sends Before a Levy and What to Expect When You Receive Intent to Levy Notices
Updated May 23rd, 2021 by Charlie Corsello
What Is an “Intent to Levy” Notice?
An IRS intent to levy notice is a notice the IRS sends if it plans to seize your assets (authorized by Internal Revenue Code Section 6331 (d)). You usually only get this notice if you have seriously delinquent taxes or irs tax debt that you haven’t tried to resolve. It references a tax period for which you owe taxes. The IRS must send you a notice the first time, for each tax and period, it intends to collect by taking your property. The IRS typically cannot take your property unless it provides you notice in advance.
Under the law, the IRS must take the following steps at least 30 days before seizing any assets:
- Provide you a written notice of the intent to levy and explain your right to appeal
- Include an explanation of the reason for the levy, the seizure process, and your options.
- Deliver the notice personally or send it to your law known address via registered mail.
However, there are exceptions to the 30-day rule with the following exceptions: seizing your state tax refund, if the IRS feels the collection of tax is in jeopardy, if you're dealing with a Disqualified Employment Tax Levy (DETL), and federal contractor levies.
What Assets Can the IRS Take If You Don’t Pay Your Taxes?
- Property (cars, homes, personal property)
- Rights to property
- Funds in bank accounts
- Social Security benefits
- Wages from your employer
- Contractor or vendor payments due to you
- Employee travel advances
- Commissions
- Retirement benefits
- Government retirement benefits from the Office of Personnel Management (OPM)
- State income tax refund or state tax refund
On top of that, the IRS can take almost anything you own beyond the bare essentials. Remember, the IRS can leave you with very little. The IRS provides publication 1494 for figuring the amount of income that is exempt from levy. The table applies to wages, salary, and other pay. It takes into account your filing status, pay frequency, and the total number of exemptions you took on your most recent tax return.
What Is a Notice of Levy From IRS?
A notice of levy from IRS is also called an IRS notice of intent to seize your property. This is the letter you receive before the IRS levies your assets. The notice may tell you that the IRS plans to levy your bank account, garnish your wages, or seize other assets. The notice also advises you of your right to a hearing.
If you have unpaid taxes, you typically receive the IRS final notice of levy 30 days before the levy takes place. The notice of levy IRS means that the levy is for federal taxes. If you receive a notice of levy from the state, that means the state plans to seize your assets for unpaid state taxes.
What Notice Does the IRS Send If It Plans to Seize Your Assets?
The IRS sends a variety of different notices and letters. These are the most common intent to levy notices:
- CP504 - IRS intends to levy your assets
- CP504B - Intent to levy for businesses
- CP77 - Intent to Seize Assets and Right to Hearing
- CP90 - Final Notice of Intent to Levy (Individuals)
- LT1058 - Final Notice of Intent to Levy
- LT11 - Final Notice of Intent to Levy
- CP297 - Final Notice of Intent to Levy (businesses)
When reviewing your notice, check to see if it mentions your right to a hearing. The IRS must notify you about your right to an appeal hearing at least 30 days before levying your bank accounts, wages, or real and personal property. If the notice doesn't mention a hearing, the IRS must send you another notice before moving forward with the tax levy. If the notice doesn't mention a hearing, the agency is most likely to just seize your state tax refunds, contractor payments, or Alaska Permanent Fund Dividend for now.
Types of IRS Intent to Levy Notices
The levy notice can vary depending on which assets the IRS plans to seize. For instance, you may receive an IRS garnishment letter. This means that the IRS plans to garnish your wages. If you don't act by the deadline on the letter, the IRS will send an IRS garnishment letter to your employer explaining the process.
If the IRS plans to seize the funds in your bank accounts, you will receive an IRS intent to levy letter that outlines that process. Typically, the IRS contacts your bank and tells them to freeze the funds in your account. The bank will freeze any amount up to the amount of your tax liability plus penalties and interest. If you don't resolve the issue in 21 days, the bank will send the funds to the IRS.
In still other cases, the IRs may send a levy notice that lists your wages, bank accounts, and other assets. Then, the letter may also explain that the IRS can levy any additional assets that it finds. All levy notices are serious. You should contact a tax professional for help.
How Many Notices Does the IRS Send Before Levy?
The IRS will send you several notices of its intent to levy before seizing your assets. At first, you will receive notices alerting you that you have an unpaid tax liability. These notices will outline how much you owe on your taxes plus interest and penalties.
Eventually, the IRS will start sending notices that say the agency is going to levy your assets. In most cases, the second to the last letter will be a notice of levy. The final letter will also say notice of levy, but it will advise you of your right to a hearing.
The IRS must send out the notices in the right order, following the correct protocol. If not, the agency can't start the levy process. There are only a few exceptions. Namely, the IRS can seize tax refunds to cover unpaid federal taxes without sending you multiple notices or advising you about your right to a hearing.
Additionally, if your account is in jeopardy of lien or levy, the IRS can also levy your assets without going through all of the required steps. This means that the IRS thinks its collection efforts are in jeopardy. To safeguard its interest, the agency may be able to seize your assets even if it hasn't sent out all of the notices.
The jeopardy of lien or levy rule also applies to liens. If the IRS thinks the collection of the tax is in jeopardy, it can also issue a federal tax lien without going through all of the protocol.
What Should You Do If You Receive a Final Notice of Intent to Levy?
The fastest way to stop the IRS from seizing your assets is to pay the entire tax debt balance. Once you make the payment, the IRS instantly stops all collection activities.
However, if you don’t have the funds to pay the full tax due, there are other options. The IRS is usually willing to work with people. In particular, you can apply for an installment agreement or an offer in compromise. In many cases, it is in your best interest to work with a licensed tax professional (EA, CPA, Tax Attorney).
If the IRS has already started garnishing your wages, this garnishment will continue until the tax is paid off, or if you reach another resolution with the IRS. Learn more about stopping an IRS wage garnishment.
Here are some options:
Installment Agreement
An installment agreement (IA) is when you make monthly payments on your taxes. An IA reduces the failure-to-pay penalty by 50 percent, but the IRS will continue to assess interest. As long as you keep up with your payment agreement, the IRS won’t seize your assets or engage in any other collection activity in most cases.
Offer in Compromise
An Offer in Compromise is when the IRS agrees to settle your taxes for less than you owe. As a result, the IRS usually only offers this type of arrangement sparingly. In fact, in 2016, the IRS accepted 43% of all Offers in Compromise. Once the IRS approves an offer in compromise, and the taxpayer pays, all collection activity stops. However, applying can be complicated so you may want professional help.
CNC Status
CNC Status is also known as a hardship status or Currently Not Collectible status. With this agreement, you provide a collection information statement to the IRS proving that if the IRS forced you to pay the taxes you owe, it would create a financial hardship.
Innocent Spouse Relief
If you believe that your spouse or former spouse is solely responsible for the tax amount owed, you can look to file Innocent Spouse Relief with the IRS. You need to meet specific qualifications.
What if You Don’t Agree with the Levy Notice?
If you don’t agree with the information on the Final Notice of Intent to Levy and Notice of Your Right to a Hearing, you can file an appeal. To start, call the number on the notice, but you may want to file an appeal as well. Calling the IRS is not the same thing, and remember, you only have 30 days before the IRS takes action.
In some cases, the IRS makes a mistake. If you’ve already set up an installment agreement, contact the IRS and make sure that your account reflects that. You may also want to start the appeal process in these cases as well.
What is the Difference Between a Tax Levy & Federal Tax Lien?
A tax lien is a legal claim the government makes against your property when you don't pay your federal taxes or have seriously delinquent tax debt. This includes income taxes, self-employment taxes, and other federal taxes. The lien is placed on your property, such as your home or car, and gives the government the right to seize the property if the liability isn't paid. A tax levy is a process the government uses to collect unpaid taxes from individuals and businesses. The government can also place a tax lien on your property before taking levy action. The biggest difference between a ien and tax levy is that the former is a claim against your property, while a tax levy actually allows the government to take possession of your property. Liens are also public record, so anyone can see that the IRS has a claim on your property. Liens can be released by paying in full or some other alternative strategy. Tax levies are not public record.
What Is a Levy IRS Meaning?
The meaning of the word "levy" means to impose a tax or a fee. For instance, the IRS levies taxes on income. In terms of tax collection, however, an IRS levy is when the IRS seizes your assets.
Get Help With IRS Intent to Levy Notices
If you have received an intent to levy notice, tax attorneys, CPAs, and EAs (enrolled agents) can help you. In many cases, they may be able to prevent the levy and or lift a levy that the IRS or state has placed on your wages. They can also help with bank levies, asset seizures, federal tax liens, unfiled taxes, and more. You can start your search below to find a professional that can help with your unique tax problem. Start by selecting the agency or agencies you have a problem with and then filter by your tax problem or desired solution and you will see tax resolution professionals that can help with your particular issues.