Receiving an IRS Notice of Intent to Levy can be an alarming experience for any business owner. This notice signifies that the Internal Revenue Service (IRS) is planning to seize business assets—such as bank accounts, wages, receivables, or other property—to satisfy outstanding tax debt. However, while the situation is serious, it is not without resolution. Businesses that act swiftly and strategically can often prevent or mitigate the levy’s impact.
This article provides a comprehensive guide on what businesses should do when they receive an IRS Notice of Intent to Levy. We will discuss the implications of such a notice, immediate steps to take, ways to negotiate with the IRS, and long-term strategies to prevent similar issues in the future.
Understanding the IRS Notice of Intent to Levy
A Notice of Intent to Levy (often issued as IRS Letter 1058 or CP90/CP297) is a formal notification from the IRS that they intend to seize a taxpayer’s assets due to unpaid tax liabilities. This notice is not issued arbitrarily; it is typically preceded by multiple warnings, including a Notice of Tax Due and a Final Notice of Intent to Levy and Your Right to a Hearing.
The IRS is legally required to provide at least 30 days’ notice before taking action, giving businesses an opportunity to resolve the issue. If the business does not respond within this timeframe, the IRS can proceed with seizing assets.
Immediate Steps to Take
Do Not Ignore the Notice
The worst response to an IRS Notice of Intent to Levy is inaction. Ignoring the notice will lead to enforcement actions that can significantly harm your business, including frozen bank accounts, garnished accounts receivable, or even seizure of business equipment and property.
Verify the Accuracy of the Notice
Carefully review the notice to ensure the IRS’s claim is accurate. Check:
- The tax years involved
- The amount owed
- Any payments that may not have been credited
- Correspondence from the IRS regarding past due taxes
If you believe the notice contains errors, you should contact the IRS immediately to dispute them.
Understand Your Rights
Under the Taxpayer Bill of Rights, you have the right to:
- Appeal the levy before it takes effect
- Seek an alternative resolution
- Request a collection due process (CDP) hearing
- Dispute the tax debt in Tax Court (if applicable)
Understanding these rights can help your business take the best course of action.
Contact a Tax Professional
Dealing with the IRS can be complex and stressful. Hiring a tax professional, such as a tax attorney, certified public accountant (CPA), or enrolled agent, can significantly improve your chances of resolving the issue efficiently. A professional can help negotiate with the IRS, file appeals, and explore alternative resolutions.
Request a Collection Due Process (CDP) Hearing
If you disagree with the levy, you have the right to request a Collection Due Process hearing within 30 days of receiving the notice. The CDP hearing allows you to present your case before the IRS Independent Office of Appeals, which may result in the levy being suspended while your appeal is considered.
Exploring Resolution Options
Pay the Tax Debt in Full
If your business has the financial means, the fastest way to stop the levy is to pay the full amount owed. This will immediately halt any IRS collection efforts. If full payment is not feasible, other options are available.
Set Up an Installment Agreement
An installment agreement allows your business to pay the tax debt over time in manageable monthly payments. The IRS offers different types of installment plans, including:
Short-term plans (paying within 180 days)
Long-term plans (monthly payments over several years)
A tax professional can help you negotiate an agreement that minimizes financial strain on your business.
Apply for an Offer in Compromise (OIC)
An Offer in Compromise allows businesses to settle their tax debt for less than the full amount owed if they can prove that paying in full would cause significant financial hardship. The IRS considers factors such as income, expenses, and asset equity when evaluating OIC applications.
Request a Hardship Status (Currently Not Collectible – CNC)
If your business is experiencing severe financial difficulties, you may qualify for “Currently Not Collectible” (CNC) status. This temporarily suspends collection activities, though interest and penalties may continue to accrue. This is often a short-term solution while working towards a more permanent resolution.
Appeal the Levy or Request a Penalty Abatement
If you believe the levy is unjust or was issued in error, you can file an appeal through the IRS Appeals Office. Additionally, if penalties have significantly increased your debt, you may request penalty abatement if you can demonstrate reasonable cause, such as unforeseen financial hardship or reliance on incorrect IRS guidance.
Preventing Future Tax Issues
Implement Strong Tax Compliance Practices
To avoid future IRS enforcement actions, businesses should establish sound tax compliance strategies, including:
- Filing all required tax returns on time
- Paying estimated taxes as needed
- Keeping accurate financial records
- Automating tax payments if possible
Work with a Tax Advisor Regularly
Regularly consulting with a tax professional can help ensure your business remains compliant and is prepared to address any potential tax liabilities before they become an issue.
Monitor IRS Correspondence Closely
Businesses should always respond to IRS notices promptly and proactively address any tax discrepancies. Keeping open communication with the IRS can prevent escalation to more severe enforcement actions.
Conclusion
An IRS Notice of Intent to Levy is a serious matter that requires immediate attention. While the notice signals potential asset seizure, businesses have multiple options to resolve the issue before the levy takes effect. By acting swiftly—whether by disputing inaccuracies, negotiating a payment plan, or seeking professional assistance—businesses can often avoid severe financial consequences.
Proactive tax management and compliance are key to preventing future IRS actions. Businesses that maintain organized financial records, seek professional guidance, and respond promptly to IRS communications can significantly reduce their risk of encountering tax levies in the future.
If your business receives an IRS Notice of Intent to Levy, don’t panic—act decisively, seek expert assistance, and explore your resolution options to protect your company’s financial stability.