IRS Levy – Notices Before Levy

What does it mean when the IRS says it plans to take enforced collection action? Usually, it means that the IRS intends to issue a levy to a bank or employer. Those are usually the first two targets of a levy because they are easy and they get the taxpayer’s attention. My experience is that most of the IRS personnel do not like issuing levies, they would rather make an arrangement with the taxpayer to pay the tax voluntarily. However, when a taxpayer does not respond to initial requests for payment, the IRS will issue a bank or wage levy.

A levy is a method the IRS may use to collect taxes that are not paid voluntarily. It can, by legal authority, take and sell property to satisfy a tax debt. Levies can be exercised against property the taxpayer holds, like a car, boat, or house, or on the taxpayer’s property that is held by third parties, like wages or funds on deposit at a bank. Even payments from the federal government like retirement payments from the Office of Personnel Management, federal vendor payments, social security benefits or federal employee travel advances or reimbursements, may be subject to the levy.

Fortunately, before the IRS can levy property, it must notify the taxpayer and give the taxpayer the following:

1. Notice and Demand;
2. Notice of Intent to Levy; and
3. Notice of a right to a Collection Due Process (CDP) hearing.

The IRS must also provide the taxpayer proper notice that it intends to contact third parties. A notice of levy is issued to a third party, and therefore, is considered third party contact. Unless an exception applies, IRC 7602(c) states that the IRS must give the taxpayer reasonable notice that it plans to contact third parties to collect the delinquent tax. See IRM 5.1.17, Third Party Contacts, prior to issuing a levy.

The taxpayer should contact an attorney as soon as he or she receives a notice from the IRS, especially one of the notices mentioned above.