Under law adopted by Congress about 20 years ago the IRS must follow a lock step procedure before it can begin enforced collection actions such as garnishment on wages, bank accounts, receivables and seizure of all other types of property. One of the most urgent type of call our office gets is one from an individual believing that IRS collection letters may result in immediate enforced collection action. Sometimes the caller is correct, quite often however, the letter the caller has gotten is not the final letter. We often explain that however menacing some of the letters may read, they are not the final and necessary letter a taxpayer will receive before enforced collection action can be taken. The final letter is one that states it is a “final notice of intent to levy and notice of right to appeal.”
Clients are understandably confused and often frightened because there is a letter before the final one numbered CP 504 (upper right hand corner of letter) that also contains “notice of intent to levy” language, but that is not the final notice of intent to levy. To clarify, here is a basic outline of the notices IRS will send in a typical income tax collection situation. We say typical, because after this series of letters has once been sent, IRS need not repeat them if a person has temporarily interrupted the collection process by, for example, an appeal or other action that temporarily stays collection such as bankruptcy.
The collection procedure normally starts a few weeks after an assessment has been made (that is a tax liability has been posted with tax, penalty and interest) when a taxpayer will receive a straightforward notice, CP 14, stating that taxes are owed, pay immediately to avoid further action, etc. Thereafter, a month or so later, a taxpayer gets a 501/502 notice which repeats that there is a balance due. This is followed by a 503 notice, or second reminder of balance due. The next letter, the 504, is one which most confuses. This letter is captioned “Notice of intent to levy” and states in bold and large print “Intent to seize your property or rights to property.” This letter also states that “we may seize your state tax refund” and contains language that says ” If you still have an outstanding balance after we seize (“levy”) your state tax refund, we may send you a notice giving you a right to a hearing before the IRS Office of Appeals, if you have not already received such a notice. We may then seize (“levy”) or take possession of your other property or your rights to property. Property includes: Wages, real estate commissions, and other income, Bank accounts, Business assets,Personal assets (including your car and home)
Social Security benefits.”
This is a menacing letter, but it also clearly says we “may send you a notice giving you a right to a hearing before the IRS Office of appeals, if you have not already received such a notice, etc.” Be clear, IRS may, and will, send such a letter, CP 90/LTR 1058, and that final letter both lays the predicate for seizure without further warning, and spells out the procedure for appeal. To restate, with few exceptions, before the IRS can levy, it must send this final Notice of Intent to Levy and Notice of your Right to a Hearing. Notice of your appeal rights, the right to a so-called Due Process Appeal, is required under Internal Revenue Code Section 6330 which states that the IRS must notify you in writing before levying, and tell you about your rights to file an appeal within 30 days in response. If an appeal is filed, the IRS cannot levy until it is resolved. If you fail to take the appeal collection may proceed. While you do have other appeal options if you miss the 30-day appeal deadline, none is as valuable as the Due Process Appeal.
Learn more about tax lawyer Martin Silver.