One of the scariest things that you can get in the mail is an IRS Intent to Levy Notice. If you received one, then you know the feeling that comes with it. For many people, it is not immediately clear what that notice means. However, getting one indicates that you are already aware of the troubles that you are having with the IRS and that they are about to get worse.
Fortunately, there are steps that you can take to resolve the problem before the levy starts. Addressing the problem head-on can be effective if you understand the IRS’s levy process and the notice that you received. Here is a guide to the IRS Intent to Levy Notice, what it means, and what you can do to improve your situation.
An IRS Intent to Levy Notice (also called a Letter 1058) is a letter that you may receive from the IRS letting you know that the agency is preparing to enforce levies to collect the current unpaid back taxes that you owe. The IRS has the authority to file and enforce levies against your assets if you owe back taxes that continue to go unpaid. Essentially, the IRS is preparing to start taking your liquid and hard assets to pay back the back taxes that you owe.
In a legal context, a levy is a legal seizure of your assets, liquid or hard, to recover unpaid funds. It is similar to a lien in that it targets your personal assets. However, a lien only places a hold on those assets so that you cannot use them in an attempt to keep you from taking their monetary value and running away. A levy is the next step, which involves taking your assets from you to collect their monetary value.
The differences between liens and levies can be summed up as follows:
In the case of an IRS Intent to Levy Notice, the IRS has a collections process that must be followed in order for it to legally and successfully collect on back taxes. This method developed over many years of changing regulations and by trial and error. You, as a citizen or national of this country, have rights that the IRS must protect in its collection efforts. Therefore, it is highly unlikely that the IRS will enact its collection process out of order to collect what you owe. This is beneficial for you, since it gives you multiple chances to pay your back taxes with steadily increasing penalties and actions only if you don’t pay.
The IRS collections process roughly follows this pattern:
The process that the IRS uses to collect back taxes is extensive. For many reasons, the IRS does not want to take hard assets. Doing so creates more hardships for you and the IRS. This means that you have multiple chances to either pay your back taxes or set up an arrangement with the IRS to pay it over time. Doing so at any point can help you avoid the lien and levy processes later in the collection process.
To resolve an IRS Intent to Levy Notice, the IRS can levy two types of assets: liquid assets and hard assets. Liquid assets are assets that can easily be traded for their monetary value. The most prominent liquid asset that anyone has is money. The IRS can levy any account that has your money in it, including your bank accounts. The IRS can also levy money that is owed to you, such as your work pay.
The IRS can garnish your wages or take a part of the wages owed to you every paycheck. The IRS will not take your entire paycheck, though, as it is clear that you need funds to continue to live on. However, this is an effective way to collect on your back taxes, since the IRS collects their portion before it gets to your bank account. Other sums that you are owed, such as a payment from a vendor that you do business with, can also be levied.
In most cases of an IRS Intent to Levy Notice, the IRS can establish these types of levies quickly. However, a levy on your bank account takes a bit longer to enforce. Initially, the IRS will have to place a lien on your bank account. This will lock you out of the account, freezing it and preventing anyone from drawing the funds out of the account. This lien will stay in place up to 45 days or until you make a payment agreement with the IRS. If the lien is in place for 45 days, the IRS will collect the funds to pay your back taxes.
Collecting hard assets is more difficult for the IRS. Hard assets include any asset that cannot be easily traded for their monetary value. Real estate is a prominent example of a hard asset. For property to be successfully levied, the IRS must put a lien on the property for an amount of time, take possession of it, have it appraised, then sell it for as much as possible. This process is costly and time-consuming, so it will likely be a method of last resort.
Aside from real estate, the IRS can levy any type of property that it believes is valuable. This means that the IRS can levy:
The IRS has a responsibility to collect owed taxes, since taxes fund the government. At times, this can mean using methods that many people might feel cross the line. Levies are an effective tactic in collecting funds, but many people feel that it is a method that crosses the line. Looking at it from the other side of the situation, the IRS is simply collecting what is owed and has not been paid. As citizens and nations of this country, we are obligated to pay the taxes that are assessed to us, and not paying those taxes can create problems for the country.
The IRS uses levies because they are effective. Levies take the control out of the hands of the taxpayers that did not pay their taxes. Levies are the last resort for the IRS. If you received an IRS Intent to Levy Notice, that means that the IRS has tried to collect funds from you voluntarily with no success. Therefore, the IRS must use levies to collect taxes when all other methods do not show results.
If you receive an IRS Intent to Levy Notice, there are several steps that you should take next. The first step that you can take is to contact the IRS directly or turn to a company like Solvable to find out more about your options. You only have 30 days to resolve your unpaid back taxes, so calling as soon as possible is the best thing that you can do.
If you work directly with the IRS, you have several options at your disposal. The most common solution is to set up a payment agreement. Usually, this agreement will have you pay installments over a set amount of time, and you will want to negotiate the length of time and the amount of each payment. The longest amount of time for the agreement that you are likely to get is six years. If you want to estimate what your payments could look like, divide your total amount owed by 72, which will give you a monthly payment amount over six years.
Rather than paying installments, you could offer a lump sum deal. In this deal, you will pay a large amount of money to have your back taxes closed. Often, the amount that you will pay will be significantly less than the amount that you owe, but it will be a substantial amount of money. In most cases, you will likely need to liquidate your assets to pay the lump sum if it is greater than the amount of money that you have available.
Note that paying a lump sum to the IRS for back taxes forgiveness is possible but is extremely rare. The IRS has a specific set of requirements that you must meet in order to qualify for a compromise and forgiveness. One of those requirements is to prove that you cannot pay the full amount that you owe no matter what you do. If you cannot pay the amount that you owe in taxes, or if doing so would be extremely detrimental to your life, then you should apply for this type of compromise.
There are many reasons why you could get to the point where the IRS is sending you an Intent to Levy Notice. While it may feel like the end of your world, there is still plenty that you can do to resolve the problem. There are two big mistakes that you can make in dealing with this situation. First, remember that you must talk to the IRS in some way. Non-compliance is the biggest motivator for the IRS to come after you, so you need to make sure that you communicate with the IRS yourself or through your legal representative.
Second, remember that you do not have to solve this problem on your own. There are many legal, tax, and debt experts available to help you resolve your unpaid back taxes. The key is to find a partner who is knowledgeable, reliable, and trustworthy to help you through this process.
At Solvable, we review companies that can help you with your back taxes. By providing resources like company reviews and articles about paying your back taxes, we can help you get a hold of this problem and keep it from ruining your life. Have a look at our company reviews to find the best company in your area. You can also take advantage of our articles and FAQs to learn more about the different ways to resolve your back taxes. That way, you’ll be knowledgeable enough to make the best decision for your situation and to find the partner that you need to get over your back taxes once and for all.