The IRS likes to remind you about tax debt. As part of it's collection process it sends these reminders in the mail with bold lettering that says “NOTICE OF INTENT TO LEVY”. Most people don't know however that there are two types of Notice of Intent to Levy letter. The first is a “CP 504” and the second is an “LT11”.
Differences between the IRS CP504 letter and the IRS LT11 letter are important to understand.
The CP504 letter states that it is a notice, it includes the debt amount, years owed, and it typically states that the IRS intends to seize your state tax refund or other property. It then threatens the seizure of assets again if no call or payment is made.
To the average person this letter tells them that levy will be happening and soon.
But…the CP504 letter is a “toothless” letter. It's toothless because the IRS can't actually levy anything until it sends out the second letter, the LT11.
The Internal Revenue Code section 6330 requires the IRS to send notice letters before it can levy but as part of that notice it must inform you of your right to file an appeal of the collection activity within 30 days of it's mailing. The LT11 letter contains that language and the form needed to file the appeal along with instructions. The LT11 letter is also sent by certified mail to your last known address.
It's important to understand the difference between the two letters for a few reasons:
1. If you receive a cp504 letter you know that you still have time to get legal advice and plan your case in order to best take advantage of the law before proposing a solution to the IRS or filing a bankruptcy. You don't necessarily want to approach the IRS prematurely.
2. If you receive an LT11 letter, you can appeal collection activity allowing you more time to prepare the case.
3. If you receive an LT11 letter, you can appeal and preserve your rights to challenge the IRS's eventual decision to Tax Court.
4. Once the 30 day timeframe is passed after the LT11 mailing date, the IRS can and will levy.
What you should do if you owe
If you owe the IRS, and don't know whether the LT11 letter has been issued, you need to obtain an IRS account transcript. This transcript will tell you whether a “real” Final Notice of intent to levy has been issued and when.
If it hasn't been issued on the year in question then you are safe from IRS collection for the time being. Instead of calling IRS collection, you should use the extra time to learn more about your options and create a plan if one is available to make your situation better for purposes of reducing or eliminating the debt.
If the LT11 letter was issued, it was to the most recent address the IRS had on file, and more then 30 days have passed, you are subject to levy and should expect it.
There are ways to stop the levy process even if the 30 day period has passed. An equivalent hearing request can be filed in certain circumstances, a payment plan request, an offer in compromise filed or even a bankruptcy. Which option you use will depend on your situation.
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