A notice of intent to levy means that the IRS intends to take your property to pay off a tax debt. You have a limited amount of time to either make payment arrangements or file an appeal.
What You Need to Know About IRS Levies
What is a levy?
Levy is the technical term for the IRS seizing your assets. Unlike other creditors, the IRS does not have to go to court to do this. They simply have to follow their own internal procedures with including sending you a notice.
When does the IRS use levies?
The IRS uses levies when you owe back taxes and haven’t responded to several requests for payment. Unlike other creditors, the IRS does not have to sue you in court. Federal law gives it the direct power to seize your assets if you haven’t paid off your tax debt after other collection attempts.
What can the IRS take with a levy?
If you don’t respond to your notice of intent to levy in a timely manner, the IRS will usually take your state tax refunds first. They will do this until your IRS debt is paid in full. If you don’t receive state tax refunds or they are small in relation to your IRS debt, the IRS may levy other assets.
Property that may be subject to levy includes:
- State tax refunds
- Bank accounts
- Real estate
- Other personal assets
- Business assets
- Up to 15% of your Social Security benefits
In some cases, your bank or other third party intermediaries may charge you a fee for processing the levy.
Types of Notice of Intent to Levy
There are several types of notice of intent to levy depending on what the IRS intends to seize and how many times they’ve contacted you.
|Notice/Letter Number||Name||Notes||Example Notice/Letter|
|Letter 11||Notice of Intent to Levy and Notice of Your Right to a Hearing||This is often the final notice before the IRS actually seizes assets.||Example|
|CP90 Notice||Intent to seize your assets and notice of your right to a hearing||This notice explains your appeal rights and that the IRS will seize your assets if you don’t respond in time.||Example|
|CP91 Notice||Intent to seize up to 15% of your Social Security benefits||The IRS intends to seize your Social Security benefits to pay down your tax debt.||Example|
|CP297 Notice||Intent to seize your assets and notice of your right to a hearing||Same as CP90 but generally for business taxes.||Example|
|CP298 Notice||Intent to seize up to 15% of your Social Security benefits||Same as CP91 but generally for business taxes.||Example|
|CP504 Notice||Notice of intent to seize (levy) your property or rights to property.||Sometimes considered an early notice because the IRS must notify you of your right to a hearing before most levies and CP504 doesn’t. But that notice will follow very quickly. This may also be the only notice you receive if the IRS intends to seize your state tax refund.||Example|
|CP523 Notice||Intent to terminate your installment agreement||The main purpose of a CP523 notice is to tell you the IRS intends to terminate your installment agreement. However, it also serves as a notice of intent to levy.||Example|
What to Do if You Receive a Notice of Intent to Levy
How should I respond to a notice of intent to levy?
Generally, the best course of action is to pay what you owe. If you can’t pay in full, the IRS has several payment options available.
You can also request a collection due process hearing. This hearing resolves questions over the fairness of the collection process such as whether the IRS is legally entitled to levy certain property or gave you the required notice. However, your rights to challenge the amount of tax owed are extremely limited at this point.
What are my payment options?
You have several options to pay the amount owed.
- Pay now in full via check, direct deposit, or credit card.
- Installment agreement directly with the IRS to pay over time.
- Offer in compromise to pay less than the full amount when it would be impossible for you to pay in full now or in the future.
- Currently not collectible if your current financial status leaves you unable to pay now but you may be able to pay in the future.
What if I already paid?
If you recently paid or made other payment arrangements, you may be able to disregard the notice of intent to levy. However, you should call the IRS to double check.
How long do I have to respond?
The deadline to respond is in your notice or letter. The deadline is often 21 days but can vary based on the type of notice and the exact situation.
Fighting an IRS Notice of Intent to Levy
What if I disagree with the amount of tax owed?
If you disagree with the amount of tax owed, the IRS likely previously sent notices stating that it made changes to one or more of your tax returns. These notices explained your appeal rights and deadlines. If it is passed the deadline to appeal those changes, you may still be able to request an audit reconsideration or file an amended return. You still need to respond to the notice of intent to levy to try to get the IRS to give you time to resolve this dispute.
What happens if I ignore a notice of intent to levy?
If you ignore a notice of intent to levy, the IRS assumes that you are waiving your appeal rights. It will go through with the levy once the deadline for you to respond has passed.
What if I don’t pay?
If you don’t pay or make other arrangements with the IRS, the IRS will probably take your stuff. In addition, the IRS may file a tax lien to prevent you from selling assets.
What is a Tax Lien?
A tax lien is a public notice that says you owe the IRS money and prevents you from selling an asset without paying off your tax debt. It also means you generally can’t borrow against that asset.
Tax liens no longer impact your credit score.
If I agree I owe the money, can I just let the IRS take what I owe them?
Allowing the IRS to go through a levy is almost never the best way to pay off a tax debt. There are several costs associated with levies. This includes the accrual of interest and penalties until you pay in full.
You may be able to take out a private loan with interest lower than these costs. If you use an IRS installment agreement with automatic payments, the failing to pay penalties are reduced.
If you don’t have anything for the IRS to take, using an offer in compromise or currently not collectible status can also offset future interest or penalties.
What are the costs of a levy?
Ignoring a notice of intent to levy is rarely the best option even if you believe the IRS is entitled to the money and you have no defense. There are several potential costs associated with a levy:
- Interest and penalties continue to accrue until your IRS account balance is $0. Waiting for the levy means your tax debt gets bigger.
- Banks and credit unions often charge their customers substantial fees to process a levy.
- You may have bills bounce or receive overdraft fees if the IRS levies your bank account at the wrong time.
- Tangible assets may be sold for less than what you believe their value to be.
Do I need professional help?
Levies are one of the most serious collection steps the IRS can take and can severely disrupt your finances. If you’re 100% sure you owe taxes (such as never paying when you filed your original tax return) and are able to pay in full now, you should probably go ahead and do so. Otherwise, you’ll likely want to at least schedule a consultation with a tax professional to discuss your options for reducing what you owe or for making payment arrangements.
A notice of intent to levy is a final warning that the IRS is about to seize your assets. You must take immediate action to stop this from happening. No matter what your financial situation is, responding is always better than ignoring the notice.