The IRS Collections Process
Anytime back taxes are owed, the IRS follows a very predictable process of notices before they take enforced collection action like seizing your income or property. And we can use this very predictable process to help determine where you are in the collections process, and how close you may be to asset seizure.
The reason why the IRS is required to follow this predictable path before taking your stuff is because of the oh-so-sweet due process rights guaranteed by the Constitution. And in all but the most extreme cases, in the IRS collections context, this largely boils down to notice requirements before the IRS can seize your property, which must be sent to your last known mailing address.
Specifically, the IRS has two notice requirements before it begin asset seizure. First, the IRS must issue what’s called a Notice and Demand for payment, and second, the IRS must issue a Final Notice of Intent to Levy and Notice of your Right to a Collection Due Process Hearing.
The “Notice and Demand for Payment” comes in the form of a letter with a little code in the top corner that says “CP14.” This letter has everything you would expect this Notice & Demand for Payment to have: an amount due, the tax year or period the created the balance, and a due date for payment.
If you do not pay by the due date, the IRS will eventually move you to the next stage of the collections process. The IRS is only required to send one additional notice, the “Final Notice of Intent to Levy” with Notice of your Right to a Collection Due Process Hearing. But they typically send at least one other collections notice before that, usually with a code CP504, CP504B, CP503, or CP501 in the top corner of the first page of the letter that has collections language alerting you that you have a balance due or using language like “notice of intent to seize or levy our property.”
The final notice, the bad one, says, appropriately enough, “Final Notice of Intent to Levy” and also contains language alerting you of your right to request a Collection Due Process hearing. This notice usually has a “LTR 1058” or “LT 11” letter code in the top corner.
If you receive an LTR 1058, LT 11, or any other letter that says “Final Notice of Intent to Levy” and gives notice of your right to request a Collection Due Process hearing, it’s your final warning that you either need to full pay, file for a Collection Due Process hearing within 30 days, or seek an approved IRS resolution like a payment plan, hardship status, or a tax settlement. If you do not pursue one of those options, the IRS is permitted to start seizing your assets. The most common targets of an IRS levy are your bank account and your paycheck.
Ultimately, if you owe the IRS and the balance due sits for too long, the IRS has a process to seize your assets including your income and almost any other property. And it’s important that you act to prevent this. Levies aint fun!
If you would like help navigating this IRS collections process, arriving at the best resolution possible and ending your IRS compliance and back taxes issues for good, schedule a consultation on our website, urbantaxlaw.com, and let’s talk about your case.
I’m Tax Attorney Dan Urban, and I look forward to hearing from you.