Every year individuals in the United States are required to file their income tax statements with the Internal Revenue Service (IRS). Once they do so, they are notified regarding whether or not they owe any tax payments to the IRS, or whether they are owed a refund.
If an individual owes taxes, they are required to pay the taxes by the deadline provided in the notice. If the individual fails to file their taxes or fails to pay the taxes they owe, they may incur penalties.
After an individual has filed their taxes, the IRS will first send a notice stating any amount that may still be owed. The statement includes a deal for paying the taxes owed. If the individual continues to avoid paying those taxes, they will receive multiple notices from the IRS regarding the money they owe.
After a period of time, the IRS will send the individual a letter known as the Final Notice of Intent to Levy. This letter may also be referred to as IRS Letter 1058, as the IRS has a classification system for many of the forms they use. The IRS may also notify the individual’s employer of their intent to levy.
The Final Notice of Intent to Levy allows the IRS to legally seize an individual’s property in order to satisfy their debt. The IRS may also:
- Garnish the individual’s wages;
- Seize money in a bank account; and
- Seize and sell real property and personal property, such as vehicles.
What is a Levy for Unpaid Taxes?
The Internal Revenue Code (IRC) is the law which governs taxation. The IRS is authorized by this code to confiscate an individual’s property if they are delinquent in paying their taxes. This can include almost any property an individual owns, including their home, their car, and their bank accounts.
The IRS can also garnish an individual’s wages, take their tax refund, and take the cash value of any of the insurance policies that they own. Although the IRS is required to provide the individual with proper notification as described above, if, after doing so, the individual fails to pay their taxes, the IRS can take almost any property they own in order to satisfy the debt.
What Should You Do if You Receive a Final Notice of Intent to Levy?
Once an individual receives the Final Notice from the IRS, they only have 30 days to either pay their debt or make arrangements to do so. Failure to do so, as noted above, will result in the IRS taking an individual’s property in order to pay off their taxes.
There are, however, several options that an individual may use to deal with this problem and have the levy released by the IRS. Reasons for the IRS to release a levy may include:
- The individual paid their debt in full;
- The individual agreed to a payment plan;
- The individual proved that they are under an economic hardship and paying their taxes would keep them from having basic funds to live on, which typically required financial documentation evidence; and
- The IRS accepted an offer in compromise.
The release of the levy does not mean the individual no longer owes taxes. It simply means the IRS will stop attempting to take an individual’s property to repay their taxes.
In general, an individual must agree to pay off the debt in the future. If the individual fails to make arrangements with the IRS to work toward paying off their debt, the IRS may create another levy on their property.
What is Required of an Employer Who Receives a Notice of Levy?
In certain cases, an individual’s employer may receive a notice of levy from the IRS against an employee, vendor, or even a third party. In these cases, the employer is required to turn over whatever property that the IRS has requested from what the employer is holding onto. Property the IRS requests may include:
- Personal property;
- A portion of the employee’s salary or wages; and
- Other types of compensation, including income derived from a bonus or a pension.
Typically, the IRS seizes these wages and financial amounts before they are paid to or given to the employee. An employer has a duty to transfer the property or amount requested to the IRS or it may face penalties.
If an employer fails to comply with the IRS levy notice that is directed towards an employee, the employer can become liable for that tax debt. The employer who fails to comply may also incur liability for any penalties that are on the debt, which includes interest.
In some cases, the IRS may impose an additional penalty of up to 50% of the tax debt that is owed by the employee. These penalties may have a drastic effect on the employer’s business tax issues. Therefore, it is essential for an employer to comply with any levy notices that it receives from the IRS.
Can You Set Up a Payment Plan for Your IRS Intent to Levy?
Yes, an individual may be able to set up a payment plan for their IRS intent to levy. A payment plan is a plan that details how the individual will pay the IRS what they owe.
The individual will need to contact the IRS and apply for a payment plan. They will be required to submit certain personal information.
After an individual requests a payment plan, the IRS will determine whether or not they qualify. If the individual qualifies, they can begin making monthly payments, which may be fairly low, and the IRS will release the levy on their property.
What is an Offer in Compromise for Your IRS Intent to Levy?
An offer in compromise occurs when the IRS agrees to accept an amount that is less than what the individual owes in taxes in order to settle their debt. The individual may either pay the amount in a lump sum, or they may make periodic payments.
An offer in compromise will require the individual to apply for it and demonstrate why they need it. The individual will need to show the IRS evidence of their financial situation that prevents them from paying their entire tax debt.
How Do I Get Back Property that the IRS has Already Taken?
If an individual’s property has already been seized, they must first contact the IRS and review their options for paying your taxes and having the levy released. If the individual is able to show economic hardship or agrees to a payment plan or another option, the IRS may release the property.
The IRS may also deny the request to return the individual’s property, which the individual can appeal. Even if the IRS releases the seizure on an individual’s property, they still owe their taxes.
If the IRS has seized an individual’s property or money without proper notification, there is a possibility of having it returned. The individual should contact the IRS and inform them that they never received a Final Notice of Intent to Levy and discuss the options available for resolving the taxes the individual owes the IRS.
Should I Contact a Tax Lawyer for a Notice of IRS Intent to Levy?
It is important to have the assistance of an experienced tax lawyer if you have received a Notice of Intent to Levy from the IRS. An attorney can review your situation and help you understand your options.
Your attorney can also help you negotiate an affordable payment plan or help you settle your debt with the IRS. Having a lawyer can mean a resolution for your tax dispute with the IRS in a way that is manageable for you.