Once a debt to the IRS becomes fixed—either through the filing of a tax return, the IRS filing a substitute for return, or through an IRS examination—the IRS generally has ten years to collect the debt from the date that the debt becomes fixed. If a taxpayer does not come forward to voluntarily to pay the debt in full or make arrangements to satisfy the tax debt, then the IRS will resort to filing liens and levying the taxpayer’s assets.

The IRS levy is a powerful collection tool that allows the government to seize your assets in a variety of ways, including garnishing your wages, taking money from your bank accounts, and demanding payment from third parties for money that is owed to you (i.e., accounts receivable from your business).

Before the IRS can seize your assets, the IRS must provide you certain notices and provide you the opportunity to request a collection due process hearing. However, after the required notices have been sent and your opportunity to request a hearing has lapsed, the IRS has the authority to seize your assets.

Overview of the Notice Cycle

Generally, once the debt becomes fixed, the IRS will send you notice and demand for payment. There are several different types, but they all serve the same purpose: to make the required legal notice and demand for payment, which is the first step in the notice cycle leading to an IRS levy. See examples of CP14 here, CP161 here, and CP22E here.

After receiving the notice and demand, the IRS will send several different reminder notices:CP501 – Reminder of Balance Due – sample here; CP503 – Second Reminder – sample here; CP504 – Notice of Intent to Levy – samplehere.

The last and most important notice in the notice cycle is LT11 – Notice of Intent to Levy and Notice of Your Right to a Hearing.  This notice carries your right to request a collection due process hearing in which you can appeal the decision to levy your assets. While this your hearing is pending, the IRS cannot, by law, levy your assets. You only have 30 days after the date on the notice to request the hearing. If you disagree with the IRS appeals decision during the collection due process hearing, you can challenge the determination in U.S. Tax Court. The IRS has an overview of the notice here and they have a sample of LT11 here.

For more on the LT11, see the post You Received an LT11, Final Notice of Intent to Levy. What’s Next? here.

If you miss the opportunity to request a collection due process hearing, then you can still request an equivalent hearing. Unlike a request for a collection due process hearing, the right to an equivalent hearing is not absolute and you do not have a right to challenge the determination in U.S. Tax Court.

If you receive a notice that a levy has attached to your assets–for example your bank accounts or accounts receivable–then you have a short period of time, usually 21 days, to attempt to convince the IRS to release the levy before your property is turned over to the IRS.

Challenges to the IRS’s Decision to Levy

There are a variety of challenges to an IRS levy, including economic hardship, the IRS’s failure to follow the law or policy, or negotiate a less intrusive means to settle your IRS debt (e.g., enter into an installment agreement or make an offer in compromise). And in some cases, you can challenge the validity or amount of the underlying IRS debt.

The first critical step to avoiding an IRS levy is to know your rights and options. After assessing your financial condition based upon IRS policies, you must approach the IRS and advocate for the most favorable collection alternative. Depending on the size of your balance, the taxpayer or the taxpayer’s representative contacts either the IRS Automated Collection Service or an IRS Revenue Officer.

The best time to approach the IRS is before the notice cycle is completed so that you can assert your collection due process rights and enter into a collection alternative. If this time period has lapsed, you can still request an equivalent hearing. And, if the IRS has already levied your bank account or assets, then you must act swiftly to attempt to recoup some of your assets.

Goal of Representation

If you received an IRS levy notice we can meet with you to review your case and provide some preliminary advice on steps to take. And after an initial free consultation, you can decide if you want to retain us to help you challenge the IRS levy. Below is a brief summary of the initial steps in a typical IRS Levy engagement.

Initial Free Consultation

  • During our first meeting, we will review any documents that you receive from the IRS (e.g., notices).
  • We can discuss your tax history (i.e., filed returns, significant positions, who helped prepare the returns, concerns you may have) and any outstanding tax debts, including debts to state taxing authorities. We will review copies of your returns associated with levy, if you have them available.
  • In addition, if you have already had any contact with the IRS Revenue Officer or IRS representative, either directly or through another representative (e.g., tax attorney, CPA), then we will discuss those communications.
  • After reviewing the notices and returns with you, we can come up with a preliminary view on best path forward to resolve your tax issues and  how to challenge the IRS levy.

Engagement

  • After meeting, if you want to utilize our services, then we will discuss engagement and fees.
  • Fill our Power of Attorney Forms (see Form 2848)
  • Preliminary Document Request
  • Obtain and Review IRS Transcripts: Once we submit the Power of Attorney to the IRS, we will obtain and review your transcripts to ensure we have a complete understanding of your situation.
  • Review your returns in greater detail along with any information provided during the preliminary to determine if there is an ability to challenge the tax debt.
  • Work with the IRS Automated Collections System or IRS Revenue Officer to reach an agreed upon collection alternative.
  •  Review and Respond to Notices from the IRS