IRS Letter 1058 and LT11: IRS Intent to Levy

Any communication from the IRS is worth reading in detail, but if you receive IRS Letter 1058 or LT11, it’s particularly important to read the notice immediately and take action. These letters notify you of the IRS’s intent to seize your property or your rights to property if you do not immediately make other payment plans. 

Time is of the essence in this situation, and spending too long weighing your options could lead to loss of assets or property rights. Make the most of your time by talking to a tax professional at Seattle Legal Services; call us at 425-428-5262 now.

The Road to IRS Letter 1058

It’s important to note that Letter 1058 should not come as a surprise. It is the last in a long line of notices sent by the IRS to taxpayers who have unpaid taxes and have not made payment arrangements. Generally, by the time you receive IRS Letter 1058, the IRS has already been trying to contact you for months.

Prior to receiving Letter 1058 or LT11, you should receive at least four separate notices from the IRS. These notices generally come at least 30 days apart, which means that you’ve likely had upwards of three months to address your tax debt, reach out to a tax attorney, or talk to the IRS about a payment plan.

The first letter you may receive is CP501, an initial reminder of the balance you owe on your unpaid taxes. If they receive no response to CP501, they will send CP502, a second reminder of your overdue balance and an official request for payment. If a taxpayer does not respond to CP502, the IRS will send CP503, a third request for payment. Finally, they send CP504, a notice of intent to levy your tax refund or other property. Once all of these notices have been ignored, they send Letter 1058 or LT11.

A Guide to Letter 1058 and LT11

Letter 1058 is a sternly worded letter that breaks down your taxes owed, your obligations under the law, and the IRS’s rights to levy your assets or place a lien on your assets.

Both LT11 and Letter 1058 have your identifying information in the upper right corner of the letter, making it easy to verify that you are the intended recipient of the letter. In this section of the letter, you’ll also find information regarding how to contact the IRS and who you should reach out to in order to discuss your options.

The body of the letter explains that the IRS has attempted to contact you multiple times regarding your tax debt and that you have failed to respond. You’ll find information on the Internal Revenue Code and the section of the code allowing the IRS to levy your assets.

In the letter, there’s also information on what the IRS will do if the matter is not handled. They can file a Notice of Federal Tax Lien at any point, which gives them a vested interest in all of your assets. If you owe more than $50,000, the IRS may also work with the State Department to have your passport revoked.

Finally, there is a helpful chart in the letter that shows you precisely how much you owe. It breaks down your total by the base amount owed, any penalties that have been added to your total balance, and any interest that has accrued.

Perhaps one of the most important parts of this IRS letter is the one that tells you what you should do next. The IRS requests payment in full, made via money order or pay check, sent with a copy of the letter you received. If you disagree with the amount you owe or the IRS’s decision to levy your assets or place a lien on them, you can request a Collection Due Process hearing. 

With Letter 1058, you’ll generally receive Form 12153, Request for a Collection Due Process or Equivalent hearing. Note that you only have 30 days to request a CPD hearing or else you forfeit your right to do so. However, after the 30-day deadline, you still have the right to request an equivalent hearing which is similar but offers fewer appeal rights.

Differences Between Letter 1058 and LT11

In general, Letter 1058 and LT11 are very similar. They include the same basic information—your identifying information, the amount you owe, your next steps, and what happens if you do not respond. 

Both letters list the assets the IRS may seize if you do not respond, including your wages, bank accounts, car, home, and Social Security benefits. However, LT11 is a bit shorter and looks more similar to previous notices from the IRS, while Letter 1058 is a longer correspondence.

What Can the IRS Levy?

The Internal Revenue Code gives the IRS substantial freedom to levy most assets owned by taxpayers. Per LT11, assets that the IRS may levy include:

• Your wages or self-employment income
• Money from bank accounts
• Business bank accounts
• Personal assets, including your home and vehicle
• Alaska Permanent Fund Dividend
• State tax refund
• Social Security benefits

The IRS cannot levy any assets or accounts that you did not have an interest in at the time the levy was enforced. Consider, for example, your bank account—once the levy is enforced, the IRS can clear out the bank account. However, it cannot take money that is added to your account after the levy is enforced. It may seek another levy though to clear out the account again.

Other assets the IRS cannot levy include a certain portion of your income, unemployment benefits, some forms of disability benefits, workers’ compensation benefits, household items, and tools needed for your job or profession.

Steps to Take Immediately After Receiving IRS Letter 1058

Once you receive IRS Letter 1058 or LT11, you should expect a levy or lien at any point after the date listed on your letter. At this point, the IRS has done everything it can to attempt to secure payment from you, and they are ready to move on to more aggressive collection actions. Here’s what to do when you receive this letter.

If You Agree With the Assessment

If you agree with the taxes assessed and you know you owe them, you can either pay your tax debt in full or move forward with other payment arrangements. Most people who get to this stage of the collection process are not able to pay in full, so it’s important to explore other payment options immediately and perhaps discuss them with a tax attorney. You only have 30 days, at which point you’ll both need to come up with payment arrangements and deal with a levy or lien on your property.

The IRS does offer numerous payment options for those who are unable to pay their tax debt in full. Options include:

• Installment agreement: This type of payment arrangements allows you to pay off your tax debt over a period of up to 72 months. You’ll have to make a minimum monthly payment, equal to approximately your total tax debt divided by 72. In order to stay compliant with IRS requirements and avoid defaulting on your installment agreement, you must make all payments on time, avoid accruing additional unpaid tax debt, and file all tax returns on time.
• Offer in compromise: This is one of several payment options for taxpayers with limited income and assets. Getting approved for an offer in compromise is a fairly time-consuming process, so you should connect with a tax pro as soon as possible to get this process started. If the IRS believes that you are truly unable to pay your tax debt in full, they may be willing to accept a smaller payment to satisfy your debt.
• Partial payment installment agreement: A partial payment installment agreement is similar in some ways to a standard installment agreement. It requires you to make payments every month, but the amount you pay is lower than the minimum required for an installment agreement. You make payments until the CSED passes, at which point the IRS stops attempting to collect on the rest of the debt.
• Currently not collectible: Similar to a PPIA and offer in compromise, currently not collectible status is reserved for those of extremely limited financial circumstances. Currently not collectible status temporarily pauses collection efforts on your tax debt. The IRS will periodically review your account and your financial assets, and once you appear able to repay your tax debt, they will resume collection efforts.

If You Disagree With the Assessment

If you either disagree with the assessed tax amount or the proposed levy, you do have the right to request a Collection Due Process hearing. You must fill out and submit Form 12153, Request for a Collection Due Process or Equivalent Hearing. 

Ensure that you do so no later than 30 days after the date listed on the top of your notice, or you lose the ability to contest the decision in U.S. Tax Court. When you fill out the form, be specific about why you are requesting a hearing.

Potential Outcomes of Ignoring These Notices

The IRS doesn’t mince words in this section of the notice. If you ignore Letter 1058, the IRS will move forward with a levy or lien on your assets after the deadline on the letter passes. Once the IRS places a lien against your property, it will become public record. 

While the lien itself will not affect your credit score, creditors are able to see it and it will likely affect your ability to obtain credit, borrow against your assets, and otherwise put yourself in a better position to pay off your tax debt.

If the IRS does not place a lien on your assets, they may go straight to levying certain assets. This may mean garnishing your wages, freezing your bank account and then seizing the money in it, or taking ownership of assets like your house or car. The proceeds from the levy will go toward paying off your tax debt.

While there are ways to regain access to your assets after a levy or lien, doing so is much more difficult than negotiating with the IRS ahead of time to compromise on a payment plan. It is crucial that you act immediately upon receiving this letter to avoid the fallout of a levy or lien.

When It’s Time to Talk to an Attorney

It’s never too early to talk to a tax professional when you’re facing tax debt you are unable to pay—but once you’re at the point of a potential levy or lien, it is definitely time to seek the advice of a tax attorney. The consequences of a levy or lien can affect your credit, your ability to provide for your family, and even ownership of your hard-earned assets. 

There are a variety of payment options that may be available to you, but until you talk to a tax attorney who knows what the IRS is likely to accept, you simply won’t know what your next step should be. The tight deadline that comes with Letter 1058 means that you should contact a tax professional immediately when you’re facing potential levies and liens.

Whenever you’re ready to take control of your tax debt and find a way out of the IRS’s more aggressive collection options, the team at Seattle Legal Services is here to help. Our experienced tax team is committed to helping taxpayers like you find solutions—and relief. Call us at 425-428-5262 or send us a message online to set up a consultation.