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IRS
Letters
After the IRS assesses a tax against you,
it initiates a series of threatening letters that are confusing.
To a person not familiar with IRS practices, it is hard to
determine which letters mean business and require immediate
action, and which letters are less urgent.
The first letter does not necessarily take any particular form.
It informs you that the IRS has assessed a liability against
you. In other words, it is your first notice that the IRS is now
your creditor and wants to get paid.
About five weeks later you will receive a letter known as CP
501. It is always the same form and basically is a remainder
notice that you owe the IRS. You know for sure that it is a CP
501 letter because it will state somewhere in the upper corner
“CP 501.”
Ten weeks after the first letter (five weeks after the CP 501
letter), you will receive CP 503. It is titled “Urgent!
Immediate action is required.” The rest of the letter is
likewise more severe than CP 501.
Sometime later, you will receive CP 504. It is titled “Urgent!
We intend to levy on certain assets. Please respond NOW.” This
letter has very severe language.
Lastly, you will receive letter 1058, Notice of Intent of Levy.
It is titled “FINAL NOTICE Notice of Intent to Levy and Notice
of Your Right to a Hearing Please Respond Immediately.” Starting
thirty days after the date of that letter, the IRS intends to
levy on your wages, bank accounts, or other property. “Levy” is
another word for “take,” as in the IRS will take your wages
directly from your employer.
The IRS cannot levy until after it issues letter 1058, so that
letter has great legal significance. The letter is always sent
certified mail. It is effective even if you reject acceptance of
the letter, so there is no reason to refuse to accept it. The
other four letters are intended to scare you into paying the
tax, penalties, and interest, and have no legal significance
except CP 504. After issuing 504, the IRS can start levying state
tax refunds.
Once the IRS issues letter 1058 (Notice of Intent to Levy), you
have thirty days to file Form 12153 to initiate a Collection Due
Process Hearing. The purpose of the hearing is to determine
whether the collection activity by the IRS is appropriate. The
IRS Appeals Division presides over the hearing, which is a
better place to be than the IRS Collection Division. Taxpayers
frequently file an offer in compromise at that time or agree to
an installment payment plan. Once in a while, if there are
special circumstances, the IRS will agree that the account is
temporarily uncollectable. In any case, during the pendency of
the hearing, the IRS must cease all collection activity (no
levies). After the hearing, if the IRS determines that the
enforced collection activity should continue, then a Notice of
Determination is issued. Thirty days after the Notice of
Determination has been issued, the IRS is free again to levy
your wages and property unless you file a lawsuit in the United
States District Court.
Both the Collection Due Process Hearing and the lawsuit in the
United States District Court extend (toll) the time during which
the IRS can to collect taxes from you. This is also known as
tolling the statue of limitations. The statute of limitations is
typically ten years from the date of assessment, unless it has
been tolled.
Bottom line, if you just received a letter 1058 (Notice of
Intent to Levy, you are about to enter a world of hurt. Each of
the other letters represents step closer toward that end. Do not
delay contacting us, as the delay can compromise the options
available to you. First of all, sometimes the IRS omits the
letters that usually precede letter 1058 (Notice of Intent to
Levy). Second, we need to have enough time to obtain your
financial information and other information that we may need from
the IRS. Do not forget that frequently the IRS will refuse to
accept a solution while there are other tax years for which
returns have not been filed. So, if we need to files tax returns
for you prior to obtaining tax relief, and you do not have the
information needed to file tax returns, it takes time for us to
obtain that information from the IRS. Do not box yourself into a
corner by delaying. Make time work for you, not against you.
Call us immediately, even if the dreaded letter 1058 (Notice of
Intent to Levy) has not yet been issued.
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