levy

First, I would like to state that tax levies and tax lien do not mean the same thing. It is easy to confuse the IRS tax levy with the IRS tax lien. 

Before I move further in this article, I would like to explain what each of these terms means.

According to the IRS, a lien is a legal claim against your property to secure payment of your tax debt, while a levy actually takes the property to satisfy the tax debt.

Now, back to the topic of discourse;

How many notices does the IRS send before levy?

The answer to this question varies slightly for individuals and businesses. Individuals often get a series of five IRS collection notice letters in the sequential order described below: A Notice CP14 comes first, followed by a Notice CP501, a Notice CP503, a Notice CP504, and lastly, the critical Final Notice of Intent to Levy, which is typically an IRS Letter 1058. 

For businesses or corporate bodies, IRS typically sends four collection notice letters in the following consecutive order: A Notice CP501 is sent first, followed by a Notice CP503, a Notice CP504, and finally, the critical Final Notice of Intent to Levy, which is typically an IRS Letter 1058.

IRS notices for Individuals.

Notice CP14

The first and most common notice sent to taxpayers is Notice CP14. The notice informs the taxpayer that a tax is due, specifies the amount of tax, including interest and penalties, and requests payment within 21 days. If the taxpayer fails to pay the amount owed within 60 days, the IRS may initiate collection action, including filing a Notice of Federal Tax Lien. 

Receiving a Notice CP14 indicates that federal tax liability for which the IRS claims is owed has been assessed. A Notice CP14 has no legal procedural significance. The IRS sends a Notice CP14 via regular mail. At this point, the IRS may not seize your assets or income.

Second, Notice CP 501

You will get the CP501 notice—your second reminder—if you don’t answer the Notice CP14 or pay your balance. Compared to the first notice, this second letter/notice is written in a more urgent style and uses stricter language. Keep in mind that the initial due date has passed. The sum will also have additional interest and penalties than indicated on your IRS letter CP14. The IRS will reduce your penalties to a minimum if you pay as much as you in a short period.

If at all possible, avoid further IRS notices. They are not easy to deal with because you may be informed that a tax lien has been placed against your assets or that the IRS will take additional legal actions. But this does not have to be the case. The IRS is willing to negotiate with you if you take the necessary steps ahead of time. A tax accountant can advise you on the best action based on your situation.

Third, Notice CP 503

The CP503 is often the third notice a person gets if they owe the IRS money. The letter informs you of the outstanding tax balance. It also outlines payment options and warns of potential IRS actions if you do not pay. To stop collection activity and minimize penalties and interest on your account, you should pay off your balance as soon as possible or make payment arrangements.

Fourth, Notice CP504

The CP504 is a notice that the IRS intends to levy your state tax refund. The notice also informs you that if your state tax refund does not fully cover the amount of federal taxes you owe, the IRS may begin searching for more assets to seize. The IRS may even file a tax lien against you.

Your tax bill is already past due when you receive this letter, and you have 30 days to make payment. The IRS has the right to confiscate your assets, including your tax refund if you don’t pay within 30 days.

Fifth, Letter 1058

Your last IRS notice of intent to levy unpaid taxes is Letter 1058. The IRS can levy or seize your assets if you don’t respond to this notice within 30 days.

The letter 1058 gives a good description of the situation. The reason the IRS is contacting you is described in the letter, along with what you must do. The letter also shows what happens if you cannot pay your tax debt. The section of this letter that is most significant is the bottom. There you can see how much you owe.

The amount you owe is shown in a table in letter 1058. The table indicates which tax return you filed (for most people, 1040) and the end date of the tax period in question.

The table also shows the balance from your previous notice, any penalties incurred since the last notice, and any new interest charges. Finally, it shows the total amount owed. Any payments made since your last notice are also included.

IRS notices for businesses.

First, Notice CP501

The IRS sends a Notice CP501 via regular mail. This notice is the first of four IRS sequential collection notice letters if you are a business or a corporate body. A Notice CP501 has no legal or procedural significance.

You will receive the CP501 notice from the IRS if there is an outstanding tax account balance. Your first reminder notification informs you that you have an unpaid debt with a 10-day grace period. Ensure you act appropriately after receiving the CP501 notice because the IRS may take further action. The CP501 form will have all the necessary information, including the payment choices, the due date, and the total amount you owe.

Note: Your balance will likely show more than you anticipated because interest and tax penalties might have been added to it. 

Second, Notice CP 503

The IRS will send you this letter as the second of four notices if your company owes taxes. The IRS sends a Notice CP503 via regular mail. A Notice CP503 has no legal or procedural significance. Instead, a Notice CP503 receipt indicates that the IRS has mailed the second of four sequential collection letters to a business entity. At this point, the IRS may not seize your assets or income.

Third, Notice CP504

A Notice CP504 is a legal procedural document that allows the IRS to levy only your state tax refund. The IRS sends a Notice CP504 via certified mail with a return receipt requested. At this point, the IRS may not seize your assets or income. This is the third of four IRS sequential collection notice letters if you are a business entity.

Fourth, IRS Letter 1058

Fifth, the IRS Letter 1058 serves as the final notice of intent to levy. This letter is a business entity’s fourth and final IRS sequential collection notice letter. The final Notice of Intent to Levy is the most IMPORTANT legal procedure in a federal tax collection case. Any Final Notice of Intent to Levy is sent by certified mail, return receipt is requested. The IRS cannot levy your assets or income until 30 days have passed since the Final Notice of Intent to Levy date.

In conclusion, acting fast whenever you get an IRS notice is advisable. In a situation whereby you are overwhelmed or confused, seek help. You should immediately contact a tax consulting firms to get a tax expert. They understand how to negotiate with the IRS to get the best payment plan or relief option for your situation.

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