How to Avoid IRS Tax Levies in the Coming Months
Updated: Apr 28
The IRS is poised to begin tax levies again on individuals and businesses with unpaid tax debts. They halted tax collection activity and collection notices in May 2020 shortly after the pandemic began. The IRS began sending out tax collection notices at the end of October/beginning of November 2020. I wrote about it back when the new notices restarted.
For the most part, the IRS has not been taking collection action relating to these notices. They have generally only been threats and suggestions for taxpayers to get into compliance immediately to prevent enforcement action. However, for larger dollar tax debts and cases of more serious non-compliance, Revenue Officers (RO) take over. Revenue Officers (RO) have been carrying out tax levies that at times have been arbitrary, chaotic and without merit. To be fair, they are managing their inventory of cases and are struggling to keep up with the surge of tax debtors due to the pandemic.
The public health situation is projected to improve in the coming months and tax experts are speculating that by summer the IRS may begin issuing tax levies through the Automatic Collection System (ACS). ACS are IRS call centers and not Revenue Officers (RO) although both can impose tax levies on wages, bank accounts, social security income, IRA's, 401k's, etc. We're poised for an ACS tax levy firestorm due to the increase in individuals and businesses that are unable to pay their taxes for 2020 compared to 2019 (for obvious reasons). Resolving delinquent taxes in ACS can be hit or miss depending on who you get on the IRS line each time you call. No one is assigned to your case so you talk to whoever picks up at the IRS call center. ACS employees have a varied level of experience and you cannot talk to the same person again if you call back.
If you receive an IRS or State tax notice, open it up and read it. Take it seriously. Do not throw it in the corner and forget about it. Definitely do not toss it in the trash. Just because they have not taken action yet does not mean that they are bluffing. They can drop the hammer at any time. Figure out what the notice is saying or talk to a tax practitioner who can figure it out for you. You have due process rights during collection activity, but only if you take action within the statutory timeframe. Failure to respond timely will forfeit your rights to a Tax Appeals hearing. Get out ahead of the problem because at the moment, everyone has what looks like a short window to enter back into compliance before the IRS resumes tax levy enforcement action. If you have unfiled prior year tax returns, get them filed. If you owe back taxes for prior year tax returns, either pay it in full or enter into an Installment Agreement (Payment Plan), Offer in Compromise Doubt as to Collectibility (OIC-DATC) or Financial Hardship Status (Currently Not Collectible). If you have been assessed a tax after an audit, Audit Reconsideration or Offer in Compromise Doubt as to Liability (OIC-DATL) may be viable options.
State tax agencies have long resumed their tax collection enforcement and are in full swing. States tend to be much more aggressive with tax levies. Everyone fears the IRS but they really should fear the states. State tax agencies are starved for revenue due to budgetary issues and are generally unconstrained legally compared to the IRS with regards to tax collection. Regardless of whether it is an IRS or State tax levy, the problem can be fixed with direct action on the part of the taxpayer.