I Received a Levy Notice. What Should I Do?

A levy notice is a legal tool used by agencies like the IRS to seize property to satisfy an outstanding tax debt. It represents a significant step in the collection process and is not a preliminary warning, but a serious communication indicating that enforcement action is imminent.

Understanding the Levy Notice

A levy notice is issued only after several other attempts to collect the tax debt have failed. Taxpayers first receive a series of letters, such as the CP14, CP501, and CP503 from the IRS. The “Final Notice of Intent to Levy and Notice of Your Right to a Hearing,” identified by codes like LT11 or Letter 1058, is sent via certified mail and is the last required warning before asset seizure can legally begin.

Upon receiving a levy notice, it is important to identify the key information. The notice will state the exact amount of tax owed, including accrued penalties and interest. It will also specify a response deadline, which is a date that dictates when you must act to protect your rights.

The authority to levy, granted by Internal Revenue Code Section 6331, allows for the seizure of various assets. This can include garnishing wages, taking funds from bank accounts, or seizing Social Security and retirement account benefits. Personal property such as vehicles or a home can also be seized and sold, although seizing a primary residence is rare.

Immediate Steps After Receiving a Notice

It is important to respond within the timeframe provided, which is 30 days from the date on the notice. Your first step should be to contact the tax agency using the phone number provided on the letter to discuss the situation and your options.

You have the right to request a Collection Due Process (CDP) hearing. This is a formal proceeding with the IRS Independent Office of Appeals where you can challenge the levy and propose alternative solutions. Requesting a CDP hearing must be done by filing Form 12153, “Request for a Collection Due Process or Equivalent Hearing,” before the 30-day deadline expires.

Filing a timely CDP request legally prohibits the IRS from proceeding with the levy while your case is being considered by the appeals office. This provides time to negotiate a resolution without the immediate threat of asset seizure. If you miss the 30-day deadline, you may still request an “equivalent hearing,” but this will not stop collection activities from moving forward.

Information Required to Resolve the Tax Debt

To negotiate a resolution, you must provide the tax agency with a complete and accurate picture of your financial situation by gathering detailed documentation.

You will need to compile proof of all income sources for your household. This includes recent pay stubs to verify wages, statements from investment or retirement accounts, and records of any other income from self-employment or other ventures. A comprehensive list of your average monthly living expenses is also necessary, covering costs for housing, utilities, food, transportation, and healthcare.

A full accounting of your assets and liabilities is also required. This means listing all personal assets like cash on hand, bank account balances, vehicles, and real estate, along with their current market values. You must also list all your debts, such as mortgages, auto loans, and credit card balances. This financial data is compiled onto IRS Form 433-A, “Collection Information Statement for Wage Earners and Self-Employed Individuals.”

How to Request a Resolution

Once you have gathered the necessary financial information and completed the required forms, you can request a resolution. The primary options include an Installment Agreement, an Offer in Compromise, or being placed in Currently Not Collectible status.

An Installment Agreement allows you to make monthly payments over time. For tax debts under certain thresholds, you may be able to apply for a payment plan online through the tax agency’s website. For larger debts or more complex situations, you would typically submit Form 9465, “Installment Agreement Request,” along with your financial statement.

An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount owed, but eligibility is strict. To apply, you must submit Form 656, “Offer in Compromise,” along with Form 433-A (OIC), a non-refundable application fee, and an initial payment. If you are facing severe financial hardship and cannot afford to pay anything, you can request to be placed in Currently Not Collectible (CNC) status, which temporarily suspends collection efforts. After submitting your request for any of these options, you should expect to receive a confirmation letter and a timeline for when a decision will be made.