IRS LETTERS

After the IRS assesses a tax against you, it initiates a series of threatening IRS notices that are confusing. To a person not familiar with IRS practices, it is hard to determine which letters mean business and require immediate action, and which letters are less urgent.

The first IRS letter does not necessarily take any particular form. It informs you that the IRS has assessed a liability against you. In other words, it is your first notice that the IRS is now your creditor and wants to get paid.

About five weeks later you will receive an IRS notice known as CP 501. It is always the same form and basically is a reminder notice that you owe the IRS. You know for sure that it is a CP 501 letter because it will state somewhere in the upper corner “CP 501.”

Ten weeks after the first letter (five weeks after the CP 501 letter), you will receive CP 503. It is titled “Urgent! Immediate action is required.” The rest of the IRS letter is likewise more severe than CP 501.

Sometime later, you will receive IRS notice CP 504. It is titled “Urgent! We intend to levy on certain assets. Please respond NOW.” This letter has very severe language.  However, if you read if carefully, it is threatening to levy only state income tax refunds.

Last you will receive IRS letter 1058, Notice of Intent of Levy. It is titled “FINAL NOTICE Notice of Intent to Levy and Notice of Your Right to a Hearing Please Respond Immediately.” Starting thirty days after the date of that letter, the IRS intends to levy on your wages, bank accounts, or other property. “Levy” is another word for “take,” as in the IRS will take your wages directly from your employer.

The IRS cannot levy, beyond state income tax refunds, until after it issues letter 1058, so that IRS letter has great legal significance. The notice is always sent certified mail. It is effective even if you reject acceptance of the letter, so there is no reason to refuse to accept it. The other four letters are intended to scare you into paying the tax, penalties, and interest, and have no legal significance except CP 504. After issuing 504, the IRS can start levying state tax refunds.

Once the IRS issues letter 1058 (Notice of Intent to Levy), you have thirty days to file Form 12153 to initiate a Collection Due Process Hearing. The purpose of the hearing is to determine whether the collection activity by the IRS is appropriate. The IRS Appeals Division presides over the hearing, which is a better place to be than the IRS Collection Division. Taxpayers frequently file an offer in compromise at that time or agree to an installment payment plan. Once in a while, if there are special circumstances, the IRS will agree that the account is temporarily uncollectable. In any case, during the pendency of the hearing, the IRS must cease all collection activity (no levies). After the hearing, if the IRS determines that the enforced collection activity should continue, then a Notice of Determination is issued. Thirty days after the Notice of Determination has been issued, the IRS is free again to levy your wages and property unless you file a lawsuit in the United States District Court.

Both the Collection Due Process Hearing and the lawsuit in the United States District Court extend (toll) the time during which the IRS can to collect taxes from you.  This is also known as tolling the statue of limitations.  The statute of limitations is typically ten years from the date of assessment, unless it has been tolled.

Bottom line, if you just received a letter 1058 (Notice of Intent to Levy, you are about to enter a world of hurt.  Each of the other letters represents step closer toward that end.  Do not delay contacting us, as the delay can compromise the options available to you.  First of all, sometimes the IRS omits the letters that usually precede letter 1058 (Notice of Intent to Levy).  Second, we need to have enough time to obtain your financial information and other information that we may need from the IRS.  Do not forget that frequently the IRS will refuse to accept a solution while there are other tax years for which returns have not been filed.  So, if we need to files tax returns for you prior to obtaining tax relief, and you do not have the information needed to file tax returns, it takes time for us to obtain that information from the IRS.  Do not box yourself into a corner by delaying. Make time work for you, not against you. Call us immediately, even if the dreaded letter 1058 (Notice of Intent to Levy) has not yet been issued.