I received the following notice under power of attorney for a client.
Another
accountant at Galactic Command works with the client. I am the tax nerd should problems
arise.
Yeah, we
have a problem.
For more
than one year, too.
Combine the
two and I can get cranky. Just because I know the route doesn’t mean I want to revisit
the site.
But back to
our topic.
The notice
seems terrifying, doesn’t it? The IRS is talking about seizing and levying and
all matters of unkindliness.
Let’s go
through the sequence of these notices.
First, you owe the IRS. There is a sequence of four notices, sometimes referred to as the “500” sequence.
- CP501 You have unpaid taxes somewhere.
- CP502 We have not heard from you about unpaid taxes.
- CP503 Hey, dummy! Are you there?
- CP504 We intend to levy if you do not do something.
This is the
fourth notice in the sequence for our client for tax year 2022. As you can see,
he/she/they are moving through the IRS machinery rather quickly. Then again,
almost $225,000 in taxes and penalties buys you a better spot in line.
The CP504 is
however not the final:final notice.
Let’s talk
IRS procedure.
Before the
IRS can go after your stuff (bank account, car, John Cena collectibles), it must
(almost always) allow you a hearing. This is called a Collection Due Process
(CDP) hearing, and it entered the tax Code with the 1998 IRS Restructuring and
Reform Act. The Act was Congress’ response to IRS horror stories, including aggressive
collection actions.
The IRS is
not allowed to go after you until you have been offered that CDP hearing. You
can turn it down, blow it off or whatever, but the IRS must provide the
opportunity before it can unleash the tender attention of Collections.
Except …
There is a short list of stuff the IRS can levy before a CDP. The list is uncommon air, except for:
Your state tax refund
That’s it.
For most of us, the IRS can only go after our state tax refund – at this stage.
Then you
have the FINAL BIG BAD notice: either the 1058 or LT11.The difference depends
on whether you have been assigned to a Revenue Officer (RO).
LIFE TIP: Avoid having your own Revenue Officer.
If you get to a 1058 or LT11, you are at the end of the line. You will be dealing with Collections, and it is unlikely you will like the experience.
You may want
an attorney or CPA, depending upon.
Not that having
a CPA seems to matter – because clearly not - to our client.
