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Officials from the National Conference for CPA Practitioners released an update this week on the IRS tax levy program. Tax chair Stephen Mankowski reported that the IRS began sending letters from an automated collection system function in June to those who owed back taxes. The income tax levy program was restarted in July, and this includes tax levy and treasury payments. Additionally, the IRS had commissioned Responsible Officers to continue work on non-filer cases and sending out notices and billing notices. The IRS stressed, however, that their focus is primarily on high-income non-filers.
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What is a Tax Levy?
A tax levy is like a tax lien, but worse. A levy is when the IRS levies a taxpayer, meaning it will contact a third-party holding property belonging to that taxpayer and order that third party to pay the government instead of the taxpayer. Law firm Fletcher Tilton states that the IRS can levy your wages, benefits and even your bank accounts. These actions can cause serious harm to taxpayers, so the IRS has to follow certain procedures when it levies or places a lien on one’s assets.
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The first step in this process is notice of its intent to do so. This process has already begun to restart after the IRS had halted doing so because of the COVID-19 pandemic. When the IRS levies a taxpayer, it is required to give the taxpayer a right to request a Collection Due Process hearing. This hearing gives the taxpayer the opportunity to work out a payment plan to pay off the debt or challenge whether or not it is due at all.
What To Do
If you have received a letter from the IRS stating intent of a levy, you can request a Collection Due Process Hearing. The levy action will then be suspended until the hearing actually happens, which can sometimes take months. Once you receive the final notice of lien or levy, you will have thirty days to request a hearing.
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Fletcher Tilton points out that what is usually not explained to the taxpayer is that they will normally receive several different letters and notices from the IRS before this happens — but they call it something different. If you receive a “CP504 Notice”, this means the intent to levy you has already begun.
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Last updated: August 5, 2021