IRS Enforcement
IRS Collection Letters:
- CP161 Request for Payment or Notice of Unpaid Balance, Balance Due
This notice shows underpaid taxes. It is the first bill. - CP501 Reminder Notice, Balance Due
This letter is sent to remind you of a balance due. No enforcement is threatened. - CP 503 Second Request Notice
The second request notice that is sent by the IRS for an unpaid balance. - CP504 Final Notice
This letter is a final notice of a balance that is due on your account. Also known as the "Urgent Letter," it states that you must pay within the next 10 days. It threatens collection actions. This letter means things are getting serious. You need to contact IRS at this point if you have not done so already to make arrangements or hire a professional. - Letter 1058 Final Notice of Intent to Levy And Notice of Your Right to a Hearing
This notice is telling you that IRS intends to issue a levy against your bank accounts, wages or other assets because you still have a balance due on one of your tax accounts. It is also telling you that they will begin searching for other assets on which to issue a levy and may also file a Federal Tax Lien, if they have not already done so. This letter is sent Certified Mail. You have appeal rights and may file a Collection Due Process request. - CP523 Notice of Default on Installment Agreement
The CP 523 notice is sent if the IRS is going to cancel your installment agreement. It will include information for the reason of termination. Common reasons include: you missed a payment, you did not file your tax return, and/or you have added a new balance due to the IRS.
Do not ignore the 1058 letter. The IRS is about to lower the boom on you if you fail to act!
You have appeal rights within 30 days of the notice.
Notice of Federal Tax Lien
Liens give IRS a legal claim to your property as security or payment for your tax debt. A Notice of Federal Tax Lien may be filed only after:
- IRS assess the liability
- IRS sends you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes
- You neglect or refuse to fully pay the debt within 10 days after they notify you about it.
Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.
The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).
Caution! Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.
Releasing a Lien
IRS will issue a Release of the Notice of Federal Tax Lien:
Within 30 days after you satisfy the tax due (including interest and other additions) by paying the debt or by having it adjusted, or Within 30 days after they accept a bond that you submit, guaranteeing payment of the debt.
In addition, you must pay all fees that a state or other jurisdiction charges to file and release the lien. These fees will be added to the amount you owe. Refer to Publication 1450, Request for Release of Federal Tax Lien (PDF).
Usually 10 years after a tax is assessed, a lien releases automatically if IRS has not filed it again. If they knowingly or negligently do not release a Notice of Federal Tax Lien when it should be released, you may sue the federal government, but not IRS employees, for damages.
Applying for a Discharge of a Federal Tax Lien
If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If you're selling your primary residence, you may apply for a taxpayer relocation expense allowance. Certain conditions and limitations apply. Refer to Publication 783, Instructions on How to Apply for a Certificate of Discharge of Property from the Federal Tax Lien (PDF).
Making the IRS Lien Secondary to Another Lien
In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination. Refer to Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien (PDF).
Withdrawing Liens
By law, a filed notice of tax lien can be withdrawn if:
- The notice was filed too soon or not according to IRS procedures
- You entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise)
- Withdrawal will speed collecting the tax
- Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the government
IRS Tables for Figuring Amount Exempt from Levy on Wages, Salary
