Do You Have the Right To Appeal an IRS Levy?
The tax levy might be the most powerful (and feared) tax collection tool of the IRS. The ability to take property without a trial or judicial order for unpaid tax collection purposes is hard to imagine sometimes. The good news for taxpayers is that appealing an IRS tax levy is possible–but the sooner you do so, the better your chances of obtaining the tax relief you seek and avoiding a bigger tax mess.
Generally speaking, the best time to file an appeal is right after receiving a levy notice from the IRS. However, appeal options can still exist after the property seizure has already occurred. The purpose of this article is to explain how both scenarios work, as well as discuss other options that may be available when dealing with an IRS tax levy. No matter when you decide to appeal an IRS levy, the experienced tax debt collection professionals from Seattle Legal Services, PLLC, are ready to help.
Schedule a consultation by calling 425-428-5262 or using our online contact form.
Key Takeaways
- Before the IRS levies property, it will have sent out multiple tax collection notices and
- warning letters informing the taxpayer about the possibility of a tax levy.
- If a taxpayer disagrees with the tax levy, they can file an appeal either before or after the levy occurs.
- Most taxpayers can appeal a levy with either a Collection Due Process (CDP) hearing or through the Collection Appeals Program (CAP).
- The right process to use depends largely on the timing of the appeal and what issues the taxpayer wants to raise during the appeal.
- If a taxpayer can’t file an appeal (or chooses not to), other ways to deal with a tax levy involve paying the outstanding balance over time or asking the IRS to reduce the tax debt.
An Overview of the IRS Levy Process
Seizing property is a significant step in the tax collection process. Therefore, the IRS can’t typically issue a levy to seize your personal or business bank accounts, wages, business property, or personal assets until four steps have been completed.
Step 1: The Tax Assessment
The IRS must determine that you owe a tax. This often happens after you file a tax return and the IRS reviews it. A tax assessment may also occur even if you don’t file a tax return, as the IRS can file a tax return for you, called a Substitute for Return (SFR).
Step 2: The Tax Bill
After the IRS assesses a tax against you, it will send you a bill. This commonly takes the form of a Notice and Demand for Payment. If you don’t pay your tax bill in full or make other arrangements to resolve your tax debt (such as paying it gradually over time), the IRS sends additional reminder notices, including CP14, CP501, and CP503. If you still don’t resolve your tax issue after receiving these notices, the IRS will start the levy process.
Step 3: The Notice of Intent to Levy
The IRS normally sends multiple levy notices that warn you about the impending levy. Some of these levy notices include:
- CP90
The LT11 and LT1058 letters are the most alarming of IRS levy notices because they represent the Final Notice of Intent to Levy and Notice of Your Right to a Hearing. This can serve as the last warning the IRS provides before levying your property, and it gives you as little as 30 days before the levy occurs.
Step 4: Notification of Third Parties
To carry out common levies, like wage garnishment or bank levies, the IRS requires the cooperation of third parties, such as a bank or employer. When the IRS contacts these third parties, they’ll let you know they’re doing so.
Only after completing these four steps will the IRS finally be able to take your property with the levy.
Exceptions to the Four-Step Process
In some cases, there could be an additional step before the levy, such as the IRS filing a Notice of Federal Tax Lien. In other matters, there may be less time and fewer notices or warning letters, which could occur with a jeopardy levy. This is a levy that lets the IRS skip the 30-day notice period. The IRS will use a jeopardy levy when it’s afraid you’ll transfer or dispose of property in a way that prevents the IRS from levying it.
The IRS may also be able to skip the notice requirements if you’re facing a disqualified employment tax levy or the agency is levying federal contractor payments.
Getting Levied Shouldn’t Come as a Surprise
By the time the IRS levies your property (or is about to), you should already be expecting it. However, you could still be blindsided by a tax levy in certain situations, such as:
- The IRS doesn’t use the correct address to send the notices.
- You’ve recently moved, and the IRS doesn’t have your new address.
- Someone mistakenly discards the tax notices addressed to you.
- You think the IRS levy notices are from scammers or tax relief companies trying to scare you into action, so you ignore them.
- Someone takes intentional steps to prevent you from receiving the tax notices (this could occur in an innocent spouse situation where your spouse hides tax problems from you).
- You mistakenly believe the IRS warnings about taking property with a levy are just empty threats.
Appealing an IRS Tax Levy
Your best time to appeal is within 30 days of receiving the final notice of intent to levy. However, you can still file an appeal if you miss this deadline or wait until after the IRS has levied your property. Regardless of when you decide to appeal, you’ll have two primary methods available:
CDP Hearing
You can appeal using a CDP hearing if you receive a levy notice mentioning that you have this right. You’ll usually have 30 days from the date of the notice to file your appeal with the IRS Independent Office of Appeals.
If you miss this 30-day deadline, you can still file an appeal, but instead of a CDP hearing, you’ll request an Equivalent Hearing (EH). You have one year from the date of the levy notice to request an EH. An EH doesn’t give you the same rights as a CDP hearing – namely, you can’t appeal the results of the hearing, as you can with a CDP hearing.
CAP
You can appeal through the CAP either before or after the IRS levies your property. The exact process depends on your prior interactions with the IRS during the tax collection process and whether an IRS Revenue Officer has been in contact with you.
The CAP process also applies if the IRS has already levied your property. If the property isn’t yet in the IRS’s possession, you’ll request a levy release. If the property has already been sent to the IRS, such as with a wage garnishment or bank levy, you’ll request to have the levied property returned to you.
If the IRS denies either the request for a levy release or for the return of your property, you can appeal either decision with a CAP appeal. The key point to remember is to move quickly. It’s a common misconception that you can file your levy appeal at any time. It’s true that you have appeal rights even after the levy is in place and the IRS has taken your property, but it’s a more complicated and difficult situation to deal with.
Additionally, even if “everything works out” and the levy is released and/or your property gets returned to you, you need to take into account the time it takes to complete the appeals process. Being without your property during an appeal could be problematic, such as not having the funds to pay your bills by their due date because the IRS took money from your paycheck or bank account.
Dealing With a Tax Levy Without Filing an Appeal
The best way to deal with a tax levy isn’t filing an appeal. Instead, it’s preventing the collection process from proceeding to the stage where the IRS starts sending you levy warning letters. If you can’t afford to pay your tax bill off in full, there are ways to resolve your tax debt so that the IRS doesn’t file a lien or levy your property. Potential options include:
Not all of these options are available in all situations. And when multiple options are available,
there will likely be an optimal solution based on your unique financial situation. A tax professional can help you with this decision-making process.
Seattle Legal Services, PLLC, Can Help You Fight an IRS Tax Levy
If your tax problem has gotten to a point where the IRS taking your home, car, paycheck, or bank account is a distinct possibility, you may not have much time left to figure out what to do.
As a result, it’s imperative to make a decision sooner rather than later. Fortunately, the tax professionals at Seattle Legal Services, PLLC, are ready to help. Our tax professionals have years of experience helping taxpayers in similar situations as yours. To learn more, schedule a consultation by calling 425-428-5262 or filling out our online contact form.
IRS Tax Levy Appeal FAQs
Can I get my property back after the IRS levies it?
Possibly, but you’ll have to file a request to have the property returned to you. If the IRS denies this request, you can appeal this decision through the Collection Appeals Program. If you’re trying to get property back, you’ll need to pay interest on top of the auction price.
What happens if I file my appeal late?
This is primarily an issue if you receive a levy notice only providing for appeals rights through a Collection Due Process hearing, as this has a 30-day appeal deadline. If you miss this deadline, you can instead appeal by asking for an Equivalent Hearing, but even that must be done within one year of the Final Intent to Levy notice.
There are two primary drawbacks to requesting an Equivalent Hearing. First, filing this type of appeal doesn’t temporarily stop the levy. Second, if you disagree with the decision following an Equivalent Hearing, you can’t go to court to appeal the decision from the Equivalent Hearing.
What’s the difference between the CAP and CDP hearing?
There are three main differences between the CDP hearing and CAP processes. First, CAP procedures are available in more situations than CDP procedures. Second, CDP procedures allow you to challenge the amount or existence of your tax debt, but CAP doesn’t give you this right. Third, if you disagree with the appeals decision, you can’t further appeal your case to court if you requested a CAP appeal.
Will filing an appeal stop the levy?
Probably, but only if you request a Collection Due Process hearing before the passage of the 30-day deadline. This levy pause doesn’t apply if you file a late appeal and only have the right to an Equivalent Hearing.
Sources
– https://www.irs.gov/businesses/small-businesses-self-employed/how-do-i-get-a-levy-released
– https://www.irs.gov/pub/irs-pdf/p1660.pdf
– https://www.taxpayeradvocate.irs.gov/get-help/interacting-with-the-irs/levies/
– https://www.irs.gov/businesses/small-businesses-self-employed/what-is-a-levy
– https://www.taxpayeradvocate.irs.gov/tax-terms/assessment-statute-expiration-date-ased/