In 2022, Americans owe a whopping $120 billion in back taxes, according to the IRS.
Now some people owe a year’s worth of taxes and can quickly get back on track. At the same time, others owe years and years’ worth of taxes and face severe consequences for their unpaid taxes.
Have you been worried about money disappearing from your bank account? Are you worried the IRS could take your property to get your tax bill covered? A notice of levy could tell you the IRS has reached its final step in collecting your money for taxes.
Read on to learn about the IRS’s notice of levy, how it works, and what you should do if you’re faced with a notice of levy.
What Is IRS LT-11?
The IRS uses the LT-11 notice as an IRS levy notice. This is the IRS’ last effort to collect any back taxes before they begin the process of levying your assets and property.
When a person is sent LT-11, the IRS has made multiple attempts to collect and resolve a tax problem. If a person receives this notice from the IRS, they will have a levy placed against them.
If there’s no response to the IRS from this notice, the IRS can levy:
- Bank accounts
- Personal assets like a car or home
- Business assets
- Social security benefits
Contacting the IRS is imperative to avoid a levy if you get this notice.
Are LT-11 and Letter 1058 the Same?
One important thing to know about the IRS is that they communicate in writing. They don’t make phone calls or send emails. Because they put all their communication in writing, they have a long list of notices and letters for different purposes.
LT-11 is the shorter version of a notice the IRS uses to warn of an imminent levy. They also use Letter 1058 for the same purpose.
LT-11 and Letter 1058 carry the same message. LT-11 is a shorter version than Letter 1058.
Why Did You Receive Letter 1058?
When you receive Letter 1058 from the IRS, they tell you it’s your last chance to rectify your back taxes before a levy occurs.
Unfortunately, some people who end up in tax trouble either don’t read the notices from the IRS or ignore them. Some might feel like they don’t have the money needed to pay the tax bill, so they don’t do anything.
The IRS needs you to communicate with them, or they will continue the collection efforts. When they get to Letter 1058, they will levy your assets to get the taxes.
It also gives you information on requesting a hearing if you feel the taxes owed are in error.
What Steps Did the IRS Do Before Letter 1058?
It’s important to know that the LT-11 letter is the last stop in the IRS’ effort to collect back taxes. This also means they have likely given many other options and warnings to get the tax bill rectified.
While every tax situation is different, there are typically some steps the IRS follows for communication with those owing tax money. The IRS sends notices in writing to communicate.
Let’s take a look at some of the steps they have likely taken before sending the intent to levy notice.
One of the first communications you’ll receive from the IRS is the CP 501 letter. This notice is the initial balance-due reminder. When you receive this letter, it’s the IRS notifying you that they believe you owe them money on one of your tax accounts.
It’s important to note that the IRS always communicates in writing, so you’ll get this and all other notices in the mail to your last known address. You can also view the notice and your options online once you receive the notice.
The CP 502 letter is the second request for payment for the balance due on taxes. If you choose not to respond to CP 502, the IRS won’t wait long to send you the CP 502 letter.
If you compare the language and tone of CP 501 and CP 502, you’ll likely find the latter has a more urgent tone. The IRS wants to convey the urgency in addressing past-due taxes.
You’ll notice in the letter that the balance due is displayed. This is likely not the exact amount displayed in CP 501. The IRS will add penalties and interest to any amount due and will continue to do this until the bill is rectified.
The CP 503 letter is the next in line to be sent if you don’t respond to the previous two requests. It’s the third reminder about unpaid taxes from the IRS.
Again, as time goes by without a resolution, the IRS will continue to tack on penalties and interest to the amount due.
If you’re getting this notice, you need to know the IRS is getting more intent on concluding.
You have the same basic options with each of these letters. You can pay your bill. If you can’t pay your bill in whole, you can also set up a payment arrangement with the IRS.
It’s also worth noting that if you make the payment arrangements and don’t follow through, the IRS will quickly resume its collection efforts.
If you’ve ignored the previous three attempts, you should know the following letter you’ll receive is the CP 504. You will also likely notice that it takes a more serious tone than the previous attempts to get paid.
The CP 504 is the IRS telling you its intent to levy state tax refunds or other property. This notice provides a 30-day notice that if you don’t address the past due taxes, the IRS intends to levy your state’s taxes.
If you have any tax money from your state, the IRS intends to sieve it at the end of the 30 days.
You have the same options, pay in full or establish a payment plan with the IRS to pay off your tax bill.
What Happens Once LT-11 Is Sent?
When you have unpaid taxes, the IRS will do whatever it takes to get your money due. They are ready to begin the levy process when they send the LT-11 or Letter 1058.
They are sending this letter as a final notice. They have already made at least four attempts to get you to respond.
The reality is that they likely don’t expect a response since, up to then, there hasn’t been one. But they do like to give a final chance for a response.
You should know that they give you a short time to respond once they send this notice. They will levy immediately without a response and a plan to pay.
If you owe more than $50,000, the IRS can work with the State Department and revoke your passport too.
How Long Do You Have to Respond?
The IRS states a time period to respond in each of the notices sent by the IRS, including LT-11 and Letter 1058. The LT-11 clearly states you must respond within 30 days of the date on the letter, or the IRS will levy your assets.
It’s not recommended that you wait until day 29 to respond. That may not give you enough time to work out an arrangement with the IRS or file for a hearing.
You should also know that once they send LT-11, they are ready to levy, but you won’t know what assets they plan to levy.
What Options Do You Have Once You Get an Intent to Levy?
Since this letter is your last chance to respond, you might wonder what options you have to respond. Your options have been outlined in each notice you’ve received.
Let’s take a closer look at what you can do to avoid the imminent levy.
Pay Your Balance
What the IRS wants you to do is to pay the amount you owe. You can pay the balance if you have the funds and agree with what is due.
This will stop all collection initiatives, and the IRS won’t levy any of your assets as long as you have paid your balance in full. The LT-11 and Letter 1058 provide directions for how to pay.
Set Up Payment Arrangements
Many people don’t respond to notices from the IRS because they don’t have the money to pay the bill in question. If you don’t have the funds to pay your balance in full, you can contact the IRS to set up a payment arrangement.
The IRS will usually work with you to set up a payment arrangement you can afford. They will likely ask you for some financial information to ensure you can afford the agreed-upon payment arrangement.
It’s important to know that if you don’t follow through with the payments you agree to, the IRS will continue its collection efforts.
File an Appeal
Another option you have, if you don’t agree with the amount the IRS says you owe, is to file an appeal. You should only file an appeal if you disagree with the amount owed.
Don’t file an appeal just to avoid paying or getting a levy.
You can use Form 12153 to request a Collection Due Process or Equivalent Hearing. If, during your preparation for the hearing, you decide you do owe the amount named by the IRS, you can still attempt informal means to resolve the taxes due.
More on the Collection Due Process Hearing shortly.
What Happens If You Ignore the Notice of Levy?
If you ignore the LT-11 notice from the IRS, you will have a levy. You won’t know what assets the IRS intends to levy.
Since this notice is the last ditch effort on behalf of the IRS to get you to respond, they intend to levy your assets to get the tax money due. You will face a levy if you don’t respond within 30 days.
Not Enough Money to Pay
It’s not uncommon for people to ignore letters from the IRS because they don’t have the money to pay. So, what are your options if you don’t have the money to pay in full?
If you agree with what is owed, you can set up a payment arrangement with the IRS. While the IRS will work with you to set up a payment arrangement you can afford, they still want you to pay.
Don’t expect them to take less than what you can afford. If you disagree with the amount due, you can request a formal hearing to dispute the amount due.
Collection Due Process Hearing
The IRS does allow you to request a formal hearing called the Collection Due Process (CDP) Hearing if you want to dispute the amount due or the penalties.
Once you request a hearing, the collection activity will pause.
Who Can Apply?
You can apply for a CDP Hearing if you have received the LT-11 or any version of Letter 1058. There are several versions of Letter 1058 to communicate in the language of the taxpayer.
Requesting a Collection Due Process Hearing
There are several ways you can request a hearing. You can follow any of these options:
- Complete Form 12153, Request for a Collection Due Process or Equivalent Hearing
- Complete a written request with the same information and submit it to the address provided in your LT-11 notice
The CDP Hearing
You will be asked to provide documentation to support your request for the hearing. If you think the amount due is incorrect, the IRS will want you to show that.
You can continue to discuss your case with the collections department and negotiate up to the hearing. You can also appeal the outcome of the appeal where the case would go to the US federal courts.
Get the Tax Help You Need
If you’re facing an LT-11 notice, you need to seek help from a tax expert. You don’t want to walk into a CDP hearing without a tax expert at your side.
The tax accountant may be able to go back through your taxes and find errors that led to the tax bill. They might be able to file new deductions and tax credits to help offset the amount due.
If you’re facing a levy, you must bring in a tax specialist.
Understanding Notice of Levy
A notice of levy can feel scary and intimidating. It is a serious situation and one that shouldn’t be ignored. A levy on your assets can only create more problems for you.
If you are worried about a tax problem, let us try to help you. Contact us to set up your free consultation to discuss your tax issues so we can get to work helping you.
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