It usually follows the law in this regard, and sends a specific letter out by certified mail typically designated as an LT11 Letter in the upper right hand corner. (Sometimes this letter is designated as an L1058 letter instead).
This letter provides you some due process by allowing you to ask for a hearing within 30 days…so that you can propose an alternative to collection. Until that hearing is finished, the IRS can't move ahead with garnishment or levy.
The IRS doesn't like this roadblock. It will almost always send out a different letter before the LT11 letter that looks almost exactly like the LT11 letter but with a different code in the corner.
That code is usually “CP504”. The CP504 letter looks very similar to the LT11 letter in that it:
1. Contains language that says “Notice of Intent to Levy”.
2. States the amount of tax debt that is due immediately.
3. Tells you that it's going to seize or levy your state tax refund or other property.
4. Threatens to do it if you don't call immediately or pay the amount due.
But…this CP504 letter doesn't contain any language telling you that you have the right to appeal.
Why does it do this? Perhaps a bit of trickery.
The IRS knows most people with tax debt aren't aware of their due process rights when it comes to tax collection. It hopes that by sending the CP504 letter first…you will respond out of fear and work out a deal that put's it at an advantage and then…ignore the LT11 letter when it comes removing your ability to discuss your situation with IRS appeals.
Don't misunderstand me…the CP504 letter is serious and it means that the IRS is actively searching for you and it's on the way. But it doesn't mean that you are in imminent danger of having your stuff taken.
If you've received a CP504 letter you should use it as a signal to get your return filing in order, your with-holdings current, and to discuss your options with experienced help… so that when the LT11 letter arrives… you can appeal if necessary and be ready to propose an alternative that most benefits your unique situation.