Let’s hope that you never receive a ‘Notice of Intent to Levy’ from the IRS. Still, it’s a good idea to understand what an IRS Levy is – not only will this give you extra motivation to finish your taxes, but you might glean some valuable tips along the way. (see ‘Takeaway’ below.) The basic rule is crucial – don’t ignore any Notices from the IRS. Unfortunately, sometimes taxpayers don’t bother to understand and take seriously the danger that they place themselves in by ignoring state or federal notices of tax payments due. Even if there is a mistake on the part of the state or IRS, do yourself a favor and take care of it now before it damages your credit or results in a collection action.
Understanding a ‘Notice of Intent to Levy’
What is it? First of all, a Levy is not a Lien – they are two different things (see ‘Liens and Levies’). A levy actually takes your property in order to pay your tax debt. If you don’t pay up or make some arrangements to settle your tax debt (see ‘Settline IRS Tax Debts’), the IRS can levy (in other words, seize and sell) whatever real or personal property that you own or have an interest in. This means that things such as your house and car are at risk, as well as your wages, IRAs, bank accounts, licenses, and many other things – even the cash loan value of your life insurance. If your bank account is levied, the bank is required to hold the funds you have on deposit (up to the amount you owe) for 21 days, and after that they must send the money plus interest to the IRS.
Note that the IRS will take action to levy only after these things have occurred:
- They have assessed the tax you owe, and
- Sent you a “Notice and Demand for Payment”,
- You didn’t pay the tax demanded, and
- They sent a “Final Notice of Intent to Levy and Notice of Your Right to A Hearing”, (also known as a ‘levy notice’) at least 30 days before the levy.
Within this 30 day period you have some options: you may ask to have your case reviewed by the IRS, or request a Collection Due Process hearing. Use IRS Form 12153 to request a Due Process hearing. But you must file your request within 30 days of the date on your notice. There are other steps you may be able to take after these reviews and hearings have resulted in a determination – a tax professional can guide you through all the options in this process.
Will it ever end?
The levy will end when:
1) Your levy is released, or
2) You pay the taxes that are due, or
3) The time expires for legally collecting the tax.
What are the most important things I can do to avoid this?
- Do your taxes on time, and correctly, so that you know if you owe any taxes to the IRS.
- Make sure the IRS always has your current physical address on file – the IRS doesn’t send Notices regarding your tax debt by email!
- Open your regular mail and respond to the IRS promptly when you receive a Notice of any kind.
Have you received a Notice, and are you confused or frightened? Talk to a qualified tax professional. For more information, contact Litchfield County tax attorney Martha Miller at 860-435-4666.