If you owe taxes to the IRS and haven’t made arrangements to pay or resolve your tax debt, the IRS may take enforced collection action in the form of a tax levy. A tax levy is the legal seizure of your property or assets to satisfy a tax debt. It can be a stressful and financially devastating event. This is why it’s crucial to understand the process and the number of notices the IRS will send before they take this drastic measure.
What Is a Tax Levy?
A tax levy is a legal action taken by the IRS to collect unpaid taxes from a taxpayer. The IRS can seize various types of property and assets, including your wages, bank accounts, retirement accounts, real estate, and personal property, such as vehicles. Levies can also be applied to future income and assets, effectively limiting your financial freedom until the tax debt is fully resolved.
The Notice Process
Before the IRS initiates a tax levy, they are required by law to provide you with multiple notices to inform you of your outstanding tax debt and give you an opportunity to resolve the issue.
Here is a breakdown of the notices you can expect to receive:
1. Notice and Demand for Payment (CP014)
This is the first notice sent by the IRS, typically within a few weeks after you file your tax return. It informs you of the amount owed, including any penalties and interest, and demands full payment within a specified period, usually 21 days.
2. Final Notice of Intent to Levy and Notice of Your Right to a Hearing (LT11 or CP90)
If you don’t respond to the first notice or fail to make arrangements to pay the tax debt, the IRS will send you a final notice. This notice informs you that the IRS intends to levy your property or assets if you don’t pay the balance due or make other arrangements within 30 days. It also informs you of your right to request a Collection Due Process (CDP) hearing to appeal the proposed levy action.
3. Notice of Federal Tax Lien Filing and Your Right to a Hearing (CP508)
If the IRS files a federal tax lien against your property, they will also send you a notice informing you of the lien and your right to request a CDP hearing.
It’s important to note that the IRS may send additional notices or reminders during this process, and in some cases, they may combine notices. However, these are the primary notices you can expect to receive before a tax levy action is taken.
The IRS will send multiple notices before initiating a tax levy, providing you with ample opportunity to address your tax debt and avoid the seizure of your property or assets. It’s essential to take these notices seriously and act promptly to resolve your tax debt or seek professional help if necessary. Ignoring the IRS notices can lead to severe financial consequences, but with proactive action, you can prevent a tax levy and get back on track with your finances.
The Law Offices of Stephen B. Kass, P.C. is a legal and accounting firm based in New York, specializing in tax settlements, negotiations, and litigation with the IRS, as well as business bankruptcy services. If you are looking for the best tax lawyers in NYC to help you stay on top of your tax-related needs, work with us today!