Many taxpayers seek the counsel of a professional tax practitioner only after they have received an ominous and threatening letter or phone call from the Internal Revenue Service. Many of these taxpayers are in fear that the IRS will shut down their businesses, seize their homes, or garnish their wages leaving them without the ability to provide for their families. Many taxpayers face each morning wondering if today will be the day that everything comes crashing down.

The reality of the government’s collection power is that the IRS has a vast array of tools available to bring delinquent accounts into compliance however those tools are tempered by rules restricting what they can take and when they can take it.

FIRST, LETS DEAL WITH “WHEN THEY CAN TAKE IT”

Of primary importance is the requirement that the IRS must always issue notice before an attempt at enforced collections. Specifically, before the government can seize assets, levy financial accounts, or garnish a taxpayer’s wages the government must issue a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” This notice, called a CP 90, is required by section 6330 and 6331 of the Internal Revenue Code. This significant requirement protects most taxpayers from unfair surprise in the form of an IRS levy or seizure.

While it is true that in most situations the government must provide notice before they levy or seize there are some instances where the levy can legally occur without any notice at all. The two examples where a levy can occur with no advanced notice are: 1. Where the IRS believes that the collection of tax will be placed in jeopardy if the government provides the taxpayer with advanced notice and 2. Cases where the taxpayer is “pyramiding” employment tax liabilities.

Jeopardy levy cases must involve: 1. assets that are being moved outside of the United States, 2. a taxpayer whose assets are being concealed, dissipated, or transferred to third parties, or 3. a taxpayer’s whose financial solvency is or appears to be imperiled. Prince v. Commissioner, 133 T.C. No. 12, 14 (2009). The immediate and permanent harm that would be caused if taxpayers could move or conceal assets gives the IRS the ability to levy now and provide notice later.

The second type of levy without notice is the so-called disqualified employment tax levy. A disqualified employee tax levy is any levy to collect employment taxes for any taxable period if the person subject to the levy, or any predecessor thereof, requested a CDP hearing with respect to unpaid employment taxes arising in the most recent two-year period before the beginning of the taxable period with respect to which the levy is served. IRC