Unfortunately, this question is more confusing than you would think. The reality is that once a taxpayer owes the federal government, a series of notices will be sent to the taxpayer by the IRS demanding payment and referencing the federal government’s ability to levy, or seize the taxpayer’s assets. While the taxpayer is always encouraged to pay his or her indebtedness to the U.S. government, the risk of enforcement action through levy of assets may only happen if certain statutory requirements are met – even though many IRS notices mention that the government may seize or levy assets.
The Internal Revenue Code authorizes the IRS to levy or seize assets in order to satisfy delinquent taxes. While there is no need for the government to file a lawsuit in order to proceed with such a seizure, it must abide by proper statutory guidelines. The IRS must send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days prior to actual seizure of assets. The IRS may levy your State tax refund prior to issuing a final notice, but must provide you with a right to a hearing, after. The final notice may be left at your home or business, provided to you in person, or sent to your last known address by certified or registered mail, return receipt requested.
Given the importance of your hearing rights explained below, if the IRS has created a debt for you a few years ago, or you failed to file returns for a period of time after a return with a balance due was filed, then you need to make sure the IRS has your proper address. This can be done by filing Form 8822 – Change of Address. The IRS is most likely to send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing to the address on your last filed tax return. If you have moved since this return was filed and your mail forwarding notice has expired, you will miss your right to a hearing. Remember, the IRS may have current income source information for you – such as W-2 or 1099 information. So, making sure the government has your proper address makes sure you are properly advised of your rights and provides you with an opportunity to address your debt before the IRS enforces collection action through a wage or bank levy, for example.
A Final Notice of Intent to Levy is only issued one time per tax period. Once issued, a 30 day clock starts. Every taxpayer has the opportunity during this window of time to request a Collection Due Process hearing. That hearing is held by the Appeals Division of the IRS, an independent division from the Collections Division. When a taxpayer requests a hearing after receiving a final notice, Appeals will make sure that all proper statutory requirements were followed by the Collections Division. Further, and maybe most important, the Appeals Division can entertain collection alternatives at this hearing. This means that you can work with Appeals to set up an installment agreement, a partial payment installment agreement, place your account in currently not collectible status, or work with the taxpayer to process an Offer in Compromise. This is a very important taxpayer right and no taxpayer should miss this opportunity to bring their matters into compliance and eliminate the uncertainty that having a delinquent tax matter creates. Please contact our office if you have any questions about these matters.