Final Notice of Intent to Levy – How to Deal with it!

December 04, 2019

By Daniel Gibson

You’ve just received frightening mail from the Internal Revenue Service, which states that this is it: a Final Notice of Intent to Levy. Resist that temptation to look away and pretend that this is not happening to you, because it is. It will take a bit of fortitude, but read through this very important notice and find that you have 30 days from the date of the notice to contact the IRS and request a Collection Due Process (CDP) Hearing. Relax, under the circumstances, this is a good thing. In most cases, up until this time, you’ve probably dealt with the anonymous IRS employees of the Automated Collection System (or ACS), whose only mission is to collect as much money from a delinquent taxpayer in as short a period as possible. As the instructions within the Notice states, the request for the Collection Due Process Hearing is done on a Form 12153.

By filing a timely Form 12153, you will have taken your case from ACS and have it assigned to the IRS’ Appeals Group. Even better, you’ll be assigned a settlement officer who will work with you (or your representative) to resolve your delinquency situation. The key here is the word – settlement. Rather than dealing with a group (ACS) that is only concerned with collecting as much from you as possible in the shortest period of time, you will be assigned an experienced IRS employee whose mission is to settle cases by working a balancing act with the taxpayer. This balancing act is defined as one which balances the government’s interest to collect the unpaid taxes with the taxpayer’s ability to pay the taxes.

The CDP hearing levels the playing field. It allows you to prepare financial information regarding your assets, debts and cash flow so that you can propose a payment plan with the IRS instead of allowing it to seize/levy your assets at will. An important advantage of a timely CDP request is that it allows you to appeal the determination of the settlement officer to Tax Court. The Tax Court is limited to an abuse of discretion standard, but, nevertheless, this does provide leverage for the taxpayer since the settlement officer knows that their work may be reviewed by a Tax Court judge. Another advantage of this hearing is that once you file a Form 12153, all IRS collection activity must come to a stop. But keep in mind that when the IRS cannot conduct collection activity, the ten-year collection statute of limitation stops as well.

So, you now have the courage to review that Final Notice of Intent to Levy and figure out the 30 days have come and gone. No worries, if the date on the Final Notice is within one year, you can still request what is known as an Equivalent Hearing. The Equivalent Hearing is similar to a CDP, except that you no longer have the right to appeal to Tax Court. Though, unless you are an egregiously delinquent taxpayer, by policy they normally will stop collection activity so that you can work out an arrangement in the Equivalent Hearing. Since the IRS can continue collections if it wants, the statute of limitations continues to run. So, in some cases, if the Collection Statute End Date is coming up, you actually may want to purposely file your CDP request late in order to get an Equivalent Hearing, Sounds counterintuitive, but it is a strategic option that should be considered.

If you want to learn more about resolving tax problems, be sure to sign up for our series, “Dealing with the IRS”

About Daniel Gibson

Daniel Gibson provides accounting, tax planning and consulting services to real estate and services industries and is a member of the AICPA and New Jersey Society of Certified Public Accountants.