| Tax Lien |
Tax Levy |
| What It Is: |
A legal claim against your assets. |
| What It Does: |
Secures the government’s interest in your property. |
| Impact: |
Harms your credit and ability to sell assets. |
| When It Happens: |
After you’ve failed to pay your tax liability. |
| What It Is: |
The actual seizure of your assets. |
| What It Does: |
Takes your property or funds to pay the debt. |
| Impact: |
You lose your property or money. |
| When It Happens: |
After a lien, and you’ve failed to respond to notices. |
The IRS Warning Process: Never Ignore These Official Notices
The IRS will not seize your assets without warning. The law requires them to follow a specific communication process, which gives you multiple opportunities to resolve your tax debt. This process almost always happens through official mail sent to your last known address, never through an unexpected phone call, text, or email.
The Chain of Communication
The process begins with a series of letters, each one more serious than the last. The goal of this communication is to get you to respond and make arrangements to pay your tax liability. Ignoring these notices is the worst thing you can do, as the IRS will interpret your silence as a refusal to cooperate, leading them to escalate their collection actions.
Key Notices to Watch For
While there are many types of IRS notices, the collection process typically follows this pattern:
- CP14 (Notice of Unpaid Tax): This is the first bill you’ll receive, informing you that you have a balance due.
- CP501 / CP503 (Reminder Notices): If you don’t respond to the CP14, you will receive one or more reminders. The tone becomes firmer.
- CP504 (Urgent Notice – Intent to Levy): This notice is a serious warning. It states the IRS’s intent to levy your state tax refund and other assets. While it is not the final notice, it is a critical signal to act immediately.
The Final Notice of Intent to Levy (Letter 1058 or LT11)
This is the most important document in the process. The Final Notice of Intent to Levy and Notice of Your Right to a Hearing is the last legal warning you will receive before the IRS can seize your assets. Upon receiving this letter, a 30-day clock starts. Within this window, you must either pay the debt in full or formally request a Collection Due Process (CDP) hearing to appeal. This is your last, best chance to proactively set up a payment plan and prevent the levy from happening. Proactive communication is your most powerful tool.
5 Proactive Steps to Prevent an IRS Levy Before It Happens
1. File All Past-Due Tax Returns
You cannot solve a problem if you don’t know its full size. The absolute first step in resolving any tax issue is to become compliant, and that means filing all of your overdue tax returns. The IRS cannot and will not negotiate a payment plan or any other resolution until it knows the total amount you owe. Even if you cannot possibly pay what you owe, you must file the returns. Filing demonstrates your intent to cooperate and is a non-negotiable prerequisite for every other solution available to you. It stops the failure-to-file penalties from accumulating and officially starts the clock on the statute of limitations for the IRS to collect the debt.
2. Respond to All IRS Correspondence Immediately
Silence is your worst enemy when dealing with the IRS. Ignoring official letters does not make the problem disappear; it makes it worse. The IRS interprets a lack of response as willful non-compliance, which guarantees they will escalate their collection efforts. A prompt response, even if it’s just to acknowledge the notice and ask for more time, shows that you are engaged and willing to find a solution. This simple act of communication can often pause aggressive collection actions like levies, buying you the crucial time needed to figure out your next steps with a tax professional.
3. Request an Installment Agreement (IA)
If you cannot pay your tax debt in full immediately, the most common solution is an Installment Agreement (IA). This is simply a monthly payment plan arranged with the IRS. For many taxpayers, this can be set up online in minutes. There are different types of IAs, but two common ones are:
- Guaranteed Installment Agreement: If you owe less than $10,000 in tax (not including penalties and interest), the IRS is generally required to grant you a payment plan.
- Streamlined Installment Agreement: For debts up to $50,000, this option involves less paperwork and offers a payment term of up to 72 months. An IA is a formal, binding agreement that stops all collection actions, including levies, as long as you make your payments on time.
4. Submit an Offer in Compromise (OIC)
An Offer in Compromise (OIC) is an agreement that allows certain taxpayers to resolve their tax liability with the IRS for a lower amount than what they originally owed. However, this option is not for everyone. It is typically reserved for those experiencing genuine financial hardship. To qualify, you must provide extensive documentation to prove to the IRS that there is “doubt as to collectibility,” meaning they are unlikely to ever collect the full amount from you. The IRS will look at your ability to pay, your income, your expenses, and the equity of your assets. While the process is complex, a successful OIC can provide a true fresh start.
5. Request “Currently Not Collectible” (CNC) Status
If your financial situation is so severe that you cannot afford basic living expenses like housing, food, and transportation, you may qualify for “Currently Not Collectible” (CNC) status. Placing your account in CNC status is a formal declaration by the IRS that you are unable to pay at this time. This will immediately stop all collection activities, including levies and garnishments. It’s important to understand that CNC is not debt forgiveness. Your debt does not go away; in fact, penalties and interest will continue to accumulate. The IRS will also periodically review your financial situation to see if your ability to pay has improved. It is a temporary pause, not a permanent solution.
Special Considerations for the South Asian Community
Navigating tax issues with the IRS can be challenging for anyone, but it can present unique hurdles for members of the South Asian community. Understanding these cultural and financial nuances is the first step toward finding a successful resolution.
Overcoming the “Shame” of Debt
In many South Asian cultures, financial problems are kept private, and debt can carry a heavy sense of shame or failure. This can make it incredibly difficult to ask for help, even from a professional. It is important to reframe this perspective. Seeking guidance from a qualified tax expert is not an admission of failure; it is a responsible and powerful act of protecting your family, your assets, and your future in this country. It is a sign of strength to face the problem head-on with the right support.
Family Obligations and Financial Hardship
The IRS’s definition of necessary living expenses can be negotiated. For many in the South Asian community, supporting aging parents in the U.S. or sending money to family back home is a deeply ingrained cultural and financial responsibility. These are not frivolous expenses. When documenting your financial situation for an Offer in Compromise or “Currently Not Collectible” status, these regular family support payments can and should be included as part of your essential monthly budget. Proper documentation is key to demonstrating to the IRS that these are necessary outflows, which can lead to a more manageable payment plan.
Beware of Predatory Scams
Immigrant communities are often the primary target of aggressive and frightening scams.1 Scammers will call or email, pretending to be from the IRS, threatening immediate arrest, deportation, or seizure of your assets if you don’t pay them instantly with a gift card or wire transfer.2 Remember: The IRS will NEVER initiate contact with you by phone call, email, or social media to demand immediate payment.3 Their first point of contact is always an official letter sent through the mail.4 If you receive a threatening phone call, hang up immediately. It is a scam.
What To Do If Your Bank Account or Wages Have Already Been Levied?
Discovering that the IRS has levied your bank account or is garnishing your wages can be terrifying, but you must act quickly and strategically. A levy is not a permanent seizure if you take the right steps immediately.
Act Immediately, You Have a Small Window
When the IRS levies a bank account, the bank is required by law to freeze the funds up to the amount you owe and hold them for 21 days. This 21-day period is a critical window of opportunity. The money has not been sent to the IRS yet, giving you a chance to negotiate a release. If you do not act within 21 days, the bank will forward the money to the IRS, and it becomes much more difficult to get it back. A wage levy is continuous and will take a portion of every single paycheck until you successfully intervene.
Contact the IRS and Your Tax Professional
Your first step is to contact the IRS immediately. You can call the number on your levy notice or the general taxpayer line at 1-800-829-1040. However, it is strongly recommended that you engage a qualified tax professional such as an Enrolled Agent (EA), a Certified Public Accountant (CPA), or a Tax Attorney at this stage. These professionals have experience dealing directly with the IRS, can often reach the right department faster, and know precisely what information is needed to negotiate on your behalf, taking the burden and stress off you.
Negotiating a Levy Release
The most effective way to get a levy released is to prove to the IRS that it is causing immediate economic hardship. This means you are unable to pay for basic, reasonable living expenses like rent, food, or essential medical care. To secure the release, you will typically need to provide the IRS with detailed financial information and agree to a formal resolution. This usually involves quickly setting up one of the solutions mentioned earlier, like an Installment Agreement or qualifying for Currently Not Collectible status. By showing you are now willing to cooperate, the IRS will often release the levy to allow you to get back on your feet.
