5.11.1  Background, Pre-Levy Actions, Restrictions on Levy & Post-Levy Actions

Manual Transmittal

February 3, 2012

Purpose

(1) This transmits revised IRM 5.11, Notice of Levy, Section 1, Notice of Levy, Background, Pre-Levy Actions, Restrictions on Levy & Post-Levy Actions.

Material Changes

(1) 5.11.1.2.1(4) Update with current IRB for frivolous arguments.

(2) 5.11.1.2.1(8) Revised to include reference to additional accuracy related or filing delinquency penalty that requires a new CDP levy notice to be issued.

(3) 5.11.1.2.1.1 Updated to correct reference current Rev. Proc. 2010-16.

(4) 5.11.1.2.2(2) Clarify the note for interest computation.

(5) 5.11.1.2.2.2(1) Clarify waiting time period prior to levy.

(6) 5.11.1.2.2.3(7) New subsection to clarify how to resolve CDP notice when only one notice is sent on a joint IMF Bal Due Account.

(7) 5.11.1.2.2.7(2) Clarify to allow 15 days for mail delivery of L3174.

(8) 5.11.1.2.2.8 Clarify situations warranting rescission of the notice of levy.

(9) 5.11.1.2.2.12 New section to address issuance of L1058 for consolidated group when collecting from assets of subsidiary.

(10) 5.11.1.3.9 Update with requirement to secure group manager concurrence with solely to delay collection determination.

(11) 5.11.1.3.14 New section to address coordination with ITG specialist when levying Indian Tribal Government.

(12) 5.11.1.4.3 New section defining test to make predecessor determination in DELT cases.

(13) 5.11.1.4.4(2) Removed paragraph restricting use of predecessor as a determination for DETL levy.

(14) 5.11.1.4.4(2) Updated second note to correspond with modification made to ICS when preparing a DETL levy.

(15) Editorial changes made throughout the text.

Effect on Other Documents

This IRM supersedes IRM 5.11.1 dated December 31, 2009. This IRM incorporates Interim Guidance Memorandum SBSE-05-0910-051, Issuing Notice of Intent to Levy/Notice of a Right to a Hearing in CFf.

Audience

This material is used by SB/SE revenue officers and AIQ - Advisory.

Effective Date

(02-03-2012)

Scott D. Reisher
Director, Collection Policy

5.11.1.1  (01-19-1999)
Background

  1. This section contains background information on notices of levy.

5.11.1.1.1  (06-29-2001)
Legal Authority

  1. The Internal Revenue Code (IRC) authorizes levies to collect delinquent tax. See IRC6331. Any property or right to property that belongs to the taxpayer or on which there is a Federal tax lien can be levied, unless it is exempt. See IRM 5.11.1.3 for restrictions on levy issuance. All references to property in this subsection include rights to property.

5.11.1.1.2  (01-19-1999)
Notice of Levy vs. Seizure

  1. There is no legal distinction between levy and seizure.

    • Generally, use a notice of levy (Form 668-A/668-W) to take a taxpayer's property held by someone else if it can be turned over by writing a check.

    • If the taxpayer is holding the property, use the procedures in IRM 5.10, Seizure and Sale.

    • If a third party is holding property that cannot be turned over by writing a check, use seizure procedures. Also, give aForm 668-A, Notice of Levy, to the third party holding the property. This is the demand to turn over the taxpayer's property. See IRM 5.10.3.5,Seizing the Property.

    Example:

    Notice of Levy is often used to take a taxpayer's bank account, wages, other income, or accounts receivables.

    Example:

    Seizure procedures are used to take a taxpayer's car, house, or business property.

    Example:

    If a taxpayer's car is seized in a commercial parking lot, seizure procedures include giving the attendant a Form 668-A, Notice of Levy, to demand that the car be turned over.

  2. There is no required sequence for levying. Generally, though, levy funds that are held by a third party first. This is usually less time consuming.

5.11.1.1.3  (12-11-2009)
Appeals

  1. Generally, taxpayers are entitled to a Collection Due Process (CDP) hearing under IRM 6330, or an equivalent hearing. See IRM 5.1.9.3.1(5) regarding the exception for child support obligations. See IRM 5.1.9.3,Collection Due Process.

  2. Notices of levy can also be appealed under the Collection Appeals Program (CAP) regardless of whether the taxpayer can appeal under IRC 6330. CAP was created to give taxpayers a chance for administrative review that is independent from the Collection function. See IRM 5.1.9.4,Collection Appeals Program.

5.11.1.2  (01-01-2006)
Pre-Levy Actions

  1. This subsection contains guidance on pre-levy actions.

5.11.1.2.1  (02-03-2012)
Required Notices

  1. Before property can be levied, the taxpayer must be given a

    • Notice and demand

    • Notice of intent to levy, and

    • Notice of a right to a Collection Due Process (CDP) hearing

    Note:

    When a notice of levy is issued to a third party, it is a third party contact. Unless an exception applies, IRC 7602(c) states taxpayers must be given reasonable notice the Service plans to make such contacts to collect delinquent tax. Make sure the taxpayer has been advised of potential third party contacts. See IRM 5.1.17,Third Party Contacts, prior to issuing a levy.

    Note:

    It is the legal position of the Service that notice and demand and third party contact notification issued in the name and EIN of a limited liability company (LLC) are legally sufficient when the owner of the LLC is the liable taxpayer.

  2. The notice and demand required by IRC 6331(a) must be left at the taxpayer's home or business, or mailed to the taxpayer's last known address. This is normally taken care of by a master file notice mailed shortly after there is an assessment. The taxpayer has 10 days to pay the amount that is owed. If the taxpayer neglects or refuses to pay the amount due, the Federal tax lien arises.

    Note:

    If the amount specified in the notice and demand is paid within 21 calendar days after the date of the notice and demand (10 business days if the amount reflected is $100,000 or more), interest is not imposed for the period after the notice and demand on the amount so paid. IRC 6601(e)(3).

  3. In addition, the taxpayer must be given a notice of intent to levy at least 30 days prior to the date of the levy. The taxpayer has 30 days to pay the amount that is owed before property can be levied. See IRC 6331(d) . This notice must be:

    1. Given in person

    2. Left at the taxpayer's home or business, or

    3. Sent to the taxpayer's last known address by certified or registered mail

    Note:

    Use registered mail only if the taxpayer is outside the United States. There is no international certified mail. See IRM 5.1.9.3.1(3), Notice of Collection Due Process Hearing Rights.

    Exception:

    If collection is in jeopardy, property can be levied immediately if the taxpayer has been provided notice and demand for immediate payment. See IRM5.11.3,Jeopardy Levy Without a Jeopardy Assessment.

  4. Generally, the Service will give taxpayers 10 days to pay the tax liability following issuance of the IRC 6303 notice of assessment and demand for payment, before issuing the IRC 6331 notice of intent to levy and IRC 6330 notice of a right to a CDP hearing. Both the IRC 6331 notice of intent to levy and the IRC 6330 notice of a right to a CDP hearing must be given at least 30 days before the day of the first levy for that tax liability. Treas. Reg. 301.6331-2(a)(1) permits the Service, in satisfying the 30 day requirement of IRC 6331(d), to issue the IRC 6331 notice of intent to levy at the same time as the IRC 6303 notice of assessment and demand for payment. Also, the Service may issue the IRC 6330 notice of a right to a CDP hearing at that same time. The IRC 6330 and/or 6331 notices should not generally be issued simultaneously with the section 6303 notice or during the section 6303 time frame.

    However the Service may determine that waiting 10 days after issuing the IRC 6303 notice and demand before issuing the IRC 6331 notice of intent to levy and/or the IRC 6330 notice of a right to a CDP hearing is not in the government's interest if one or more of the circumstances listed below has occurred. The IRC 6330 and /or 6331 notices may be issued simultaneously with the section 6303 notice or during the section 6303 time frame if the taxpayer:

    • is pyramiding employment taxes (in business, not current with FTDs, and two or more trust fund modules assigned to a revenue officer);

    • has made to the Service, for two or more periods, frivolous arguments which are listed in Notice 2010–33, 2010–17 IRB 609, or subsequent updates. See Notice 2010–33 at http://www.irs.gov/pub/irs-irbs/irb10-17.pdf;

    • has failed to file required returns for two successive periods or three non-consecutive periods, for which the Service has prepared substitutes for return (and issued a deficiency notice where applicable), at least one of which is included in current or general practices. See IRM 5.1.18.12.2.4,Verify Possible New Addresses Received from Asset Locator Research when a new address is received from asset locator research.

    Note:

    The taxpayer has 30 days in which to request a CDP hearing. Allow 15 days after the 30 day period for receipt of a timely mailed request for CDP hearing.

  5. When a levy is to be served, the taxpayer must also be given a notice of a right to a hearing per IRC 6330. See (6) below. The taxpayer has 30 days after this notice is given or mailed to ask for a hearing, before property can be levied. This notice is given to the taxpayer in the same manner as the notice of intent to levy, except that if it is mailed, a certified or registered mail return receipt MUST be included. See IRM5.1.9.3,Collection Due Process, for instructions about the taxpayer's right to a hearing, including whether the taxpayer can appeal, when the taxpayer can appeal, and the consequences of asking for an appeal.

    Note:

    The taxpayer can waive the right to a hearing. IRM 5.11.1.2.2.9, Waiver of Notice of Intent to Levy/Notice of a Right to a Hearing.

    Note:

    There is no right to a hearing when child support obligations are being collected. IRM 5.11.1.2.2.11., Issuing Notice of Intent to Levy for Child Support Obligation Bal Dues.

  6. There are 4 exceptions to the pre-levy notice requirements of IRC 6330.

    1. When the collection of tax is in jeopardy under section 6331(a). See IRM 5.1.9.3.14,Jeopardy Levy and SITLP and IRM 5.11.3, Jeopardy Levy without Jeopardy Assessment.

    2. A levy is served on a State to collect a Federal tax liability from a State tax refund, referred to as the State Income Tax Levy Program (SITLP). A taxpayer's state tax refund can be levied, even though the taxpayer may not have already been sent a notice or a right to a hearing. See IRM 5.1.9.3.14,Jeopardy Levy and SITLP.

    3. A disqualified employment tax levy is served. See IRM 5.1.9.3.15,Disqualified Employment Tax Levy.

    4. A Federal Contractor Levy is served. A Federal contractor levy is any levy if the person whose property is subject to the levy (or any predecessor thereof) is a Federal contractor.

      Note:

      In each of the above situations, the taxpayer will be given the opportunity for a CDP hearing within a reasonable period of time AFTER the levy; i.e., generally within 10 days.

  7. When counting the 10 day or 30 day periods, do not count the day that the notice is given or mailed to the taxpayer. Then, when the time to pay has run out, the next action can be taken on the following day.

    Caution:

    As long as a request for a hearing is correctly addressed and postmarked timely, it is timely. Allow 15 additional days after the 30 day period ends before levying in case the taxpayer mails a request for a hearing on the 30th day.

    Example:

    A notice of a right to a hearing is given to the taxpayer on March 1. The taxpayer has until the close of business on March 31 to pay or request a CDP hearing. On April 1, the Code allows property to be levied, unless something has happened to prevent it, e.g., payment, request for a hearing, installment agreement made or pending, etc. However, counting the additional 15 days, property will not be levied until April 16.

    Exception:

    After 30 days, if the taxpayer confirms that no hearing has been requested, there is no need to wait the additional 15 days.

    Exception:

    If the notice was unclaimed, returned undeliverable, or delivery was refused, there is no need to wait the additional 15 days, as long as the notice has only been sent to one address. If multiple notices have been sent, as described in IRM 5.11.1.2.1.1, wait the additional 15 days, unless all of them are returned undeliverable, unclaimed, or refused.

    Exception:

    If collection is in jeopardy, a notice of levy can be served without waiting the additional 15 days. The notice of levy must be approved by the territory manager or an AIQ - Advisory territory manager. Consult with counsel before the levy is served. The appeal process in IRM 5.11.3.6,Appealing the Jeopardy Levy, does not apply because the 30 day waiting period has passed. A CDP hearing will be held if the taxpayer mailed or delivered the request for a CDP hearing before the 30 days ran out. If a CDP hearing request is not made, the taxpayer can still discuss the levy with the group manager or the Taxpayer Advocate Service, as well as discussing it with Appeals under the Collection Appeals Program after speaking with the group manager.

  8. The required notices must be sent for each module included on a levy.

    Caution:

    If the required notices for a module have been issued, and then additional tax, accuracy related or filing delinquency penalty is assessed, a new notice offering a CDP hearing for the additional assessment must be issued before that additional assessment may be included in a levy. There is no requirement to divide out the original and the new assessment amount on the L-1058.

    Example:

    A module has a TC 150 dated June 01, 2007. The CDP levy notice listing the TC 150 and appropriate penalties is issued on December 31, 2007. A TC 300 assessment is made on 03/31/2009. A new Notice of Intent to Levy and Notice of Your Right to a Hearing must also be issued for this additional assessment before it can be included in a notice of levy.

    Example:

    A module has a TC 150 assessment date June 01, 2007. A CDP levy notice listing only the TC 150 amounts is issued on December 31, 2007. The CDP levy notice does not include any assessed or accrued failure to pay penalty. Before any levy action to collect the failure to pay penalty can occur, a CDP levy notice for the failure to pay penalty must be issued (unless a post-levy CDP notice is applicable). Note: If any accrual of the penalty, even one month, is included on the CDP notice, then the taxpayer is not entitled to another CDP notice when the Service wishes to collect by levy later assessed additional accruals of the penalty. In addition, the listing of an accrual on a CDP notice, even if not assessed, is sufficient to satisfy the CDP notice requirement with respect to the penalty.

  9. See IRM 5.11.6.12.2,Notice to the Non-Liable Spouse, when a levy is to be served on a non-liable spouse in a community property state.

5.11.1.2.1.1  (02-03-2012)
Last Known Address

  1. Generally, the last known address is the master file address that posted from the most recently filed and properly processed return. A list of returns that are used to update this address is in Rev. Proc. 2010–16. This revenue procedure also describes how taxpayers can give a new address to the Service.

  2. A last known address may be obtained or changed by information received from the United States Postal Service National Change of Address database (NCOA database). As provided in Treas. Reg.§ 301.6212-2(b)(2), an address obtained from the NCOA database becomes the taxpayer's last known address unless the taxpayer provides clear and concise notification of a change of address (as set out in Rev. Proc. 2010–16) or the Service properly processes a taxpayer's federal income tax return with a different address.

  3. If a third party provides a new address for the taxpayer, this is not the taxpayer's last known address, unless the taxpayer verifies it and requests it be used as such by the Service.

  4. When a Notice of Intent to Levy and Notice of Your Right to a Hearing (L1058) is mailed to the taxpayer, it must be sent to the last known address. If other addresses have been received from third parties without a change to the official last known address, send a copy of the L1058 and the enclosures to the taxpayer at these other addresses on the same date that the L1058 is sent to the last known address. Use regular mail for the copies sent to other addresses.

    Note:

    There is no need to check for additional taxpayer addresses before sending the L1058, unless there is reason to believe that the last known address is not valid, e.g., mail has already been returned undeliverable, information gathered during a field call raises doubt that the address is valid, etc. Checking third party sources that are reasonably available at the office where the case is assigned is a normal part of skip tracing to try to locate the taxpayer. Try to find a valid address before sending the L1058 to a last known address that is not current.

  5. If the taxpayer has already been sent an L1058 and another address is found later, do not send an additional L1058 for the same Bal Dues to this new address, as long as the original notice was correctly sent to the address that was the last known address when it was mailed. If another written notice to the taxpayer at this new address is needed, use Letter 3174(CG), New Warning of Enforcement, or 3174-A(CG), New Warning of Enforcement for Joint Filers.

    Example:

    The L1058 was mailed and was returned unclaimed, but it was correctly sent to the taxpayer's last known address. While working the account later, a new address for the taxpayer was found. Attempts to contact the taxpayer at the new address to demand payment are unsuccessful. Letter 3174(CG) or Letter 3174-A(CG) may be sent or left at the new address to try to get the taxpayer to pay the amount owed or to contact the revenue officer.

  6. If a mailed L1058 is mistakenly not sent to the last known address, issue L3876, See IRM 5.11.1.2.2.8, and request input of a TC 972 AC 069 to reverse that notice. Issue an L1058 to the taxpayer at the correct last known address. Release any levies that had been served for liabilities included in the improperly mailed L1058. Also see IRM 5.11.2.3,Returning Levied Property to the Taxpayer.

5.11.1.2.2  (12-11-2009)
Satisfying the Notice Requirements

  1. Generally, a notice and demand is sent before a revenue officer receives a Bal Due account. However, if there are existing Bal Dues assigned on ICS, notice modules will be accelerated to Bal Due status resulting in the notice and demand being sent by the campus at the time of ICS assignment.

  2. The campus sends the taxpayer the notice and demand, unless there is a jeopardy, quick, termination, or prompt assessment.

  3. The Notice of Intent to Levy and Notice of Your Right to a Hearing (L1058) is usually issued on initial contact with a BMF or combination BMF/IMF taxpayer when a deadline is set for the taxpayer to take specific action, e.g., provide proof of payment, proof of Federal Tax Deposits, financial statement information, substantiation for a request for abatement or adjustment, etc. Use of Form 9297, Summary of Taxpayer Contact, is required to establish what is due and the deadline for receipt.

    Note:

    It is not necessary to have a levy source at the time the L1058 is issued.

    Note:

    To avoid an incorrect FTP penalty computation on L1058s issued on ICS, the date for the penalty and interest computation will systemically default to 10 days from the date of the L1058. If the 504 notice (status 58) has been issued on every module to be included on the letter, then, if you so choose, 10 days can be overridden and 30 days used. See IRC 6651(d) and IRC 6331(d).

    Reminder:

    L1058 and L1058-A are available in Spanish.

  4. Use discretion when issuing the L1058 on initial contact with an IMF only balance due taxpayer. Consider the circumstances of the case and the compliance history of the taxpayer in determining whether to issue the L1058.

5.11.1.2.2.1  (12-11-2009)
Recognizing if ACS Issued Notice of Intent to Levy/Notice of a Right to a Hearing

  1. ACS also issues a Notice of Intent to Levy/Notice of a Right to a Hearing.

  2. If the ACS transcript shows action code LT11 on or after 1–19–1999 for the same liabilities that a revenue officer will be levying to collect, do not issue an L1058. An LT11 issued before 1–19–1999 was only a notice of intent to levy. It did not include the notice of a right to a hearing.

    Exception:

    The ACS transcript may show LT11, but the notice may have been stopped before it was sent.

    If And Then
    Action Code CLnn (nn is a two digit number) is on the ACS transcript. This Code is the same date as the LT11. The LT11 was not sent.
    Action Code MCLT is on the transcript. The LT11 is the most recent LTnn (nn is a two digit number) before the MCLT. The LT11 was not sent.

  3. Another way to recognize if the notice has been issued already is to see if there is a Transaction Code (TC) 971, Action Code (AC) 069 on the module. This is input after the campus mails the ACS notice. Then, the results of mailing the notice, if known, are shown by a second TC 971.

    • AC 066 - the return receipt was signed (not necessarily by the taxpayer) , so the notice was delivered. See second Note in IRM 5.11.1.2.2.2

    • AC 067 - delivery was refused or the notice was unclaimed

    • AC 068 - the notice was returned, undelivered

    Note:

    Action Codes 066–069 cannot be input on Individual Retirement Account File (IRAF) modules.

5.11.1.2.2.2  (02-03-2012)
Issuing Notice of Intent to Levy/Notice of a Right to a Hearing in CFf

  1. When, on initial contact, a deadline is set for a BMF or BMF/IMF combination taxpayer to take specific action, the L1058 will be issued with all required enclosures. Allow 15 additional days after the 30 day period ends before levying in case the taxpayer mails a request for a hearing on the 30th day. IRM 5.11.1.2.1. for additional guidance. Explain to the taxpayer:

    1. If they do not meet the deadline, the enforcement action warned of may take place after 30 days, and

    2. That only by making a request for a CDP hearing, preferably using Form 12153, Request for a Collection Due Process or Equivalent Hearing, within the next 30 days, will the right to go to court be preserved.

      Note:

      If the taxpayer does request a hearing, continue to work with the taxpayer pursuant to IRM 5.1.9.3.3,Processing CDP and Equivalent Hearing Requests.

  2. When the L1058 is delivered in person, input ICS Delivery Method as "Hand Delivered" . This will upload IDRS Transaction Code (TC) 971, Action Code (AC) 069 and TC 971, AC 066 on the same date.

  3. If no contact is made on the attempted initial contact, the L1058 and all required enclosures may be left in an envelope at the taxpayer's home or business or mailed certified the same business day. Note Caution in (4) below.

  4. When the L1058 is left at the taxpayer's home or business, input ICS Delivery Method as "Left at Home/Business." This will upload IDRS TC 971, AC 069 and TC 971 AC 067 on the same date.

    Caution:

    The date on the L1058 must be the date it is given to, left for, or mailed (return receipt requested) to the taxpayer.

  5. If initial contact is made with the authorized representative only and a deadline is set for specific action to be taken, provide a copy of the L1058 to the representative and mail the original and all required enclosures to the taxpayer by certified or registered mail, return receipt requested. Input TC 971, AC 069, and follow-up with the appropriate transaction code per IRM 5.11.1.2.2.1 when the results of the delivery are known.

  6. When extenuating circumstances exist such as assigned inventory covering a large geographical area, and initial contact with the taxpayer is not in the field, L1058 should still be issued if a deadline is set for the taxpayer to take specific action.

  7. Issuing L1058 in any case is not appropriate or may not be appropriate when:

    1. Levy action is prohibited, such as when the taxpayer requests an installment agreement on initial contact or the pending installment agreement transaction code has already posted

    2. A levy would not be issued if the taxpayer did not comply with the deadline, e.g., the taxpayer is in a hardship situation or there is doubt as to the correctness of the liability

    3. Information obtained during the attempted contact indicates the taxpayer may no longer be at the last known address

    4. IMF accounts have been in a suspended status, e.g., assigned to the Queue or reported currently not collectible for more than 12 months

    5. The taxpayer satisfactorily demonstrates that the deadline set will be complied with, e.g., the taxpayer provides documentation that a loan is in process to full pay the liability

  8. Because taxpayers only have the right to one Collection Due Process hearing for each taxable period and assessment, do not list liabilities on L1058 that have already been included in such a notice. Issuing more than one notice for a taxable period may give taxpayers the impression they can have another CDP hearing for that liability.

    Reminder:

    None of the campus IDRS notices are notices of a right to a hearing.

    Reminder:

    If the L1058 is mailed, it must be sent by certified or registered mail WITH A RETURN RECEIPT.

  9. When the delivery results are known, update the Mail Receipt Response in ICS by choosing one of the following:

    1. Accepted delivery

    2. Unclaimed/refused

    3. Undelivered

    This will upload the AC 066, 067, or 068 as shown in IRM 5.11.1.2.2.1 For modules that are not in status 26 or when the TC 971, AC 069, should be input for a date that is more than 30 days before the current date, prepare Form 4844, Request for Terminal Action, for manual terminal input to IDRS. Ask the terminal operator to input the date the action took place, rather than the date of the input. If the delivery results cannot be determined, no additional input is required.

    Example:

    The L1058 is mailed on March 10. The TC 971, AC 069, is input on March 12. The date of the TC is March 10.

    Note:

    Inputting AC 067 on the same date as the AC 069 shows the notice was left at the taxpayer's home or business. Refused delivery is distinguished from this by the AC 067 being a later date than the AC 069.

    Note:

    If the return receipt comes back unsigned, but the envelope is not attached, use AC 066. If there is a postmark date on the receipt, use that as the date of the transaction. If there is no postmark date, use the date that the return receipt is received.

    Note:

    In the past, if an IDRS 504 notice (status 58) had never been issued for a module, TC 971 Action Code 35 was input to increase the failure to pay rate to 1% after L1058 was issued. Action Code 069 now causes this change. If the higher rate has not already gone into effect because of a 504 notice, Action Code 35 is not necessary.

  10. If the L1058 was not issued on initial contact, do not issue it when, after consultation with the Fraud Technical Advisor (FTA), it is determined that a firm indication of fraud has been established. (See IRM 25.1.3.2 ,Preparation of Form 2797).

  11. Except in cases involving a taxpayer identified as an in-business repeater trust fund taxpayer ( IRM 5.7.8.2,Identifying Repeater Trust Fund Taxpayers), or pyramiding trust fund taxpayer ( IRM 5.7.8.3Pyramiding Trust Fund Taxpayers) avoid issuing the L1058 if you have issued a Collection summons to the same taxpayer for the same tax periods and the summons is still pending. Issuing the notice while the summons is pending could conflict with the taxpayer's opportunity in CDP to resolve any issues or disputes.

  12. A summons is considered pending when:

    • Issuance of the summons will occur during the 30 days the taxpayer has to exercise CDP rights

    • Compliance with the summons will occur during the 30 days the taxpayer has to exercise CDP rights

    • Referral of the summons will occur during the 30 days the taxpayer has to exercise appeal rights

    • The taxpayer exercises the right to a hearing and the compliance date for the summons will occur during the time the hearing is pending in Appeals

    Note:

    The L1058 may be issued when the pending summons was issued to a third party.

5.11.1.2.2.3  (02-03-2012)
Issuing Notice of Intent to Levy/Notice of a Right to a Hearing for Joint IMF Bal Due account

  1. If there are Bal Dues for jointly filed income tax returns, prepare two copies of L1058-A, because the Service is required to send notices relating to joint returns separately to each taxpayer.

    1. If they are not delivered in separate envelopes in person or left at the taxpayers' home or business, mail them in separate envelopes to the taxpayers. Address one envelope to the primary taxpayer and one to the secondary taxpayer, although both taxpayers' names will be on each of the notices. Do not use a window envelope. Do this regardless of whether the taxpayers live at the same address or different addresses. If there are joint and separate liabilities, be careful that taxpayers are not sent a notice for taxes they do not owe.

      Example:

      John and Mary Doe owe tax for their 2005 joint income tax return. John Doe also owes tax for his single return for 2004. John must be sent a notice for both years, but only send Mary a notice for 2005.

    2. If the notices are going to different addresses, do not reveal one person's address to the other.

      Example:

      William and Barbara White owe tax for a joint income tax return. They now have different addresses. ICS users must make two passes of the application to generate two letters, one pass to generate a letter for William and a second pass to generate a letter for Barbara. "William and Barbara White" will appear next to, "For Account of" in the upper right hand corner of the letter.

    3. Before sending the L1058-A to joint taxpayers living at different addresses, try to contact both of them, so the letter is not a surprise to either of them. If one of the taxpayers is living in a different jurisdiction, try to get a telephone number to call this person before sending the L1058-A. If a number cannot be found or the attempted call fails, the letters can still be sent.

  2. Before sending the L1058-A to the secondary taxpayer, check master file on-line to find out if this person has filed a return with a different address since the joint return(s) that generated the Bal Dues. This step is not necessary when there has been contact with the taxpayers confirming the secondary taxpayer’s address or when the Bal Dues are for the most recent tax year.

    Example:

    There are Bal Dues for Steven and Marcia Brown for their joint income tax return for 2000. The revenue officer has not been able to contact the taxpayers but has found a joint levy source, so two L1058-As are going to be sent. Before sending them, the revenue officer uses master file on line to check Marcia Brown’s social security number and finds that she has filed a more recent return with a married filing separate filing status and a different address. The L1058-A issued to Marcia is mailed to the address on her most recent return rather than the same address where Steven Brown’s L1058-A will be mailed.

  3. If levy on one of the taxpayer's property is prohibited, use the L1058 rather than the L1058-A and do not issue a separate L1058 to that person. Instead, prepare a notice with both taxpayers’ names on it, and deliver or mail it in an envelope addressed to the taxpayer whose property can be levied. When the condition that prohibits levy no longer exists, an L1058 can be issued to that person. Also, see IRM 5.11.2.1.2(4),Preparing the Notice of Levy.

    Example:

    John and Mary Doe owe tax for a joint return. They are separated, and Mary is making payments on an installment agreement for the joint liability. John is not a party to the installment agreement. The L1058 will have both names on it, but it will only be issued to John. Issuing an L1058 to Mary would be improper, because her installment agreement prevents levy on her property. Later, Mary defaults on her agreement; she has the right to appeal the default. She must also be issued an L1058 giving her the right to a CDP hearing if she has not already received that right for each liability. During her appeal and during the 30 days she has to request a CDP hearing, collection can continue against John.

  4. However, when separate notices are sent for joint assessments on ICS, when entering the Delivery Method and Mail Receipt Response, select "Primary, Secondary, or Both" as appropriate. If the L1058 is not input through ICS, Form 4844 should be prepared including the secondary taxpayer's SSN as "X-Ref XXX-XX-XXXX" in the "Remarks" on the Form 4844 for inputting the record of that person's notice. This will distinguish the primary and secondary taxpayer's ACs.

    Example:

    John and Mary Doe's notices for their joint 2004 income tax return are both mailed on 1–29–2006. John's return receipt comes back signed, but Mary's is returned undeliverable. There will be two TC 971s with AC 069 on 1–29–2006. One will have Mary's X-Ref SSN. The other will have no X-Ref SSN. There will also be a TC 971 AC 066 with no X-Ref SSN for John's notice and a TC 971 AC 068 with Mary's X-Ref SSN for Mary's notice.

  5. Separate notices do not have to be issued when CFf is collecting the same liabilities for which ACS already issued its LT11, Notice of Intent to Levy/Notice of Your Right to a Hearing. While working the Bal Dues in CFf, you may discover that the taxpayers were separated, and one of them was not living at the last known address when the LT11 was sent. As long as that was the person’s last known address when the notice was sent, it was a legally valid notice of a right to a hearing. IRM 5.11.1.2.1.1. Nevertheless, it may be inequitable to take this person’s property without notice. Give Letter 3174(CG) to the taxpayer who was not living at the address before serving additional notices of levy on that person’s property, and release notices of levy that have been served on that person’s property.

  6. You may send two L1058-As for a joint Bal Due and discover later that one of the taxpayers was living at a different address when the letters were sent. Although the notice is legally valid if it is sent to the last known address, it has been administratively determined that Letter 3174(CG) will be sent to this taxpayer before serving additional notices of levy on that person’s property, and notices of levy that have already been served on that person’s property will be released.

    Note:

    Because of procedures in (2), above, this should only be an issue if the secondary taxpayer has not reported a new address.

  7. In a situation where you determine that you have erred by only mailing one L1058 to each spouse listed on the jointly filed income tax return (e.g., in an envelope addressed to both of them), a substitute Letter 1058 (Letter 1058-A) must be issued to each spouse who has not timely requested a CDP hearing from the one L1058. The Letter 1058-A should be dated the day it is issued. If one or both spouses timely request a CDP hearing prior to your discovering the inadvertent error, the CDP hearing request(s) should be processed per IRM 5.1.9. The invalidity of the improperly sent notice is cured by the timely hearing request. If neither taxpayer has requested a CDP hearing, the notice is invalid as to both taxpayers, send separate Letter 1058-A to each, and release notices of levies that have been served on either spouse’s property based on the invalid notice. When the notice is substituted, input Transaction Code (TC) 972, Action Code 069, to reverse each TC 971 that has already been input for the invalid letter. The input date for each TC 972 must be the same as the date for the TC 971 it is reversing.

5.11.1.2.2.4  (12-11-2009)
Issuing Notice of Intent to Levy/Notice of a Right to a Hearing for Deceased Taxpayers

  1. Generally, if a taxpayer has died, a proof of claim may be filed to collect delinquent tax from the estate. Some circumstances may call for the issuance of a notice of levy.

    Example:

    The estate or certain assets may not be going through probate.

    Example:

    For a joint return, the assets of the surviving spouse may be levied to collect the delinquent tax.

  2. AIQ - Advisory and/or Associate Area Counsel may need to be consulted to determine whether a notice of levy can be served.

  3. If a notice of levy will be issued, L1058 must be sent to the estate administrator or executor. Research probate records to obtain the name of the estate administrator or executor. See IRM 5.5.3.4,Field Collection Actions, for procedures to be followed in investigations involving a deceased taxpayer.

  4. For single liabilities

    IF THEN
    There is no estate administrator or executor Send the L1058 to:
      Estate of John Smith (Dec'd)
    John Smith's Last Known
    Address

    IF THEN
    There is an estate administrator or executor Send the L1058 to:
      Estate of John Smith
    Charles Jones, Administrator (or Executor or Personal Representative)
    Charles Jones' Last Known Address

    Note:

    Consider sending a copy to the address of the fiduciary and/or attorney for the estate.

  5. For joint IMF liabilities, one spouse deceased

    IF THEN
    There is no estate administrator or executor Send two L1058s.
    Address both to:
      Mary Doe and Estate of James Doe
      Use James's last known address on his L1058 and Mary's last known address on hers. Put James's L1058 in a non-window envelope addressed only to him at his last known address. Put Mary's L1058 in a non-window envelope addressed only to her at her last known address or issue it to Mary on initial contact.

    IF THEN
    There is an estate administrator or executor Send two L1058s.
    Address one to:
      Mary Doe and Estate of James Doe
    William Green, Administrator (or Executor)
    William Green's Last Known Address
      Put the L1058 in a non-window envelope addressed the same way as the letter, except delete Mary's name.
      Address the other L1058 to:
      Mary Doe and Estate of James Doe
    Mary Doe's Last Known Address
      Put the L1058 in a non-window envelope addressed the same way as the letter, except delete James' name. The L1058 can also be delivered on initial contact with Mary.

    Note:

    Consider sending a copy to the address of the fiduciary and/or attorney for the estate.

5.11.1.2.2.5  (12-11-2009)
Issuing Notice of Intent to Levy/Notice of a Right to a Hearing for Partnership Liability

  1. The Service may levy on the property of a partnership or the general partner's property and rights to property to collect the employment tax liability of the partnership.

  2. If the Service intends to levy on the partnership assets to collect the partnership liability, send the L1058 to the last known address of the partnership. Do not send additional L1058s to the partners at their addresses.

    Exception:

    If the partnership is no longer operating, or there is another reason to know the last known address is not current, the L1058 must still be sent to this address. Also send a copy of the letter and the enclosures to any general partners whose addresses are known, e.g., partners who provide their addresses when contacted about the taxes, and partners whose addresses are found through normal skip tracing when a partnership is no longer at its last known address. Use regular mail for the copies sent to the partners.

  3. If the Service intends to levy on the property or rights to property of an individual general partner to collect the employment tax liability of the partnership, send the L1058 to the individual general partner whose property the Service intends to levy and to the partnership. Use regular mail for the copy sent to the partnership.

  4. If the Service intends to levy on the partnership assets and an individual general partner assets to collect the partnership liability, send an L1058 to the last known address of the partnership and the individual partner.

  5. ICS generally reflects the partnership name as it appeared when it was established on IDRS. It may contain the name of the partnership, its trade name and/or the names(s) of its general partners. Before generating the L1058 to the individual general partner, you must

    1. Identify the general partner,

    2. Document the ICS case history,

      Note:

      Enter "Individual Gen Ptr, see history MMDDYYYY" in the MISC INFO section on the IDRS MAILING ADDRESS screen on ICS. This provides a central location for others reviewing a case to locate the history entry that identifies the individual general partner.

    3. Create a new name line on ICS to identify the individual general partner,

      Note:

      Create it as an OTHER ADDRESS, and select it when requesting administrative collection actions

    4. Create a separate name line for each individual general partner, if the identity of the individual general partner changes from one period to the next, and

    5. Clarify the tax periods attributed to each individual general partner in your summarizing ICS history entry

      Note:

      Select the correct name line created to generate the L1058 through ICS.

      Note:

      Include only the name and TIN(s) of the individual general partner on the L1058.

5.11.1.2.2.6  (12-11-2009)
Issuing Notice of Intent to Levy/Notice of a Right to a Hearing for Limited Liability Company (LLC)

  1. Prior to issuing L1058, for employment taxes assessed in the name of the LLC, determine the liable taxpayer for each tax period; i.e., whether the LLC or the owner is liable and input appropriate TC 971 action codes on each module:

    1. AC 364 (LLC is the liable taxpayer)

    2. AC 365 (LLC owner is the liable taxpayer)

    3. AC 366 (liable taxpayer changed during this period)

    Note:

    See IRM 5.1.21,Collecting from Limited Liability Companies (LLCs), for guidance.

  2. When the LLC is the liable taxpayer, the L1058 is issued in the name of the LLC and the LLC, itself, has the right to a hearing.

  3. When the owner of the LLC is the liable taxpayer, the L1058 must be issued in the name of the owner, and the owner has the right to a hearing.

    Note:

    If the L1058 is mailed, it must be sent to the owner's last known address. If the L1058 is hand delivered then it must be either given in person or left at the dwelling or usual place of business of the owner.

  4. If the identity of the liable taxpayer changes due to changes in classification or regulations, issue one notice to the LLC for the tax period(s) when the LLC is liable and a separate notice to the owner for the tax period(s) when the owner is liable.

  5. If the L1058 was originally issued to an incorrect liable taxpayer or address, issue a new notice to the last known address of the correct liable taxpayer. Input TC 972 AC 69 to reverse each TC 971 relating to the incorrect notice(s).

    Note:

    The input date for each TC 972 must be the same as the date for the TC 971 it is reversing.

5.11.1.2.2.7  (02-03-2012)
Timeliness of Notice

  1. The purpose of the Notice of Intent to Levy described in IRM 5.11.1.2.1 is to warn the taxpayer that failure to respond may result in imminent enforcement. When a long time has passed since the notice was issued and there has not been enforcement action or a warning of enforcement, the notice loses its effectiveness as a warning.

  2. A Notice of Intent to Levy is legally sufficient to support subsequent collection action by levy regardless of its age. However, it has been administratively determined that the taxpayer will get a new warning of enforcement action before a notice of levy is issued if there has been no other enforcement action or warning of enforcement for at least 180 days.

    1. This warning must be documented in the case file and should be determined by the specific facts of the case. It may be given orally (in person or by phone) by telling the taxpayer that there is a deadline, e.g., 15 days, 30 days after which there will be enforcement action. If the taxpayer cannot be contacted in person or by telephone, then the warning may be given in writing. Use Letter 3174(CG), New Warning of Enforcement. Use Letter 3174-A(CG), New Warning of Enforcement for Joint Filers, when the letter is issued to both spouses for joint income taxes. Allow a minimum of 15 days for mail delivery of Letter 3174 before taking enforcement action.

      Note:

      Do not issue another L1058 to give the taxpayer a timely warning. For each liability the taxpayer gets the opportunity only once for a CDP hearing described in that letter . Issuing another L1058 will give the incorrect impression that the taxpayer can have a CDP hearing again for the same liability.

    2. Exceptions to a new warning of enforcement include the following :

      • Collection is at risk. The territory manager or an AIQ - Advisory territory manager must approve the levy. The taxpayer can discuss the levy with the group manager, the Taxpayer Advocate Service, and the Appeals Officer.

      • Computer matching programs in which files of liabilities are matched against files of assets/income resulting in immediate payment, e.g., State Income Tax Levy Program, Federal Payment Levy Program.

      • The taxpayer requests a CDP hearing. The Notice of Determination in CDP constitutes a warning of imminent enforcement if the levy is supported.

      • The taxpayer is a trust fund repeater or pyramider. See IRM 5.7.8.2, Identifying Repeater Trust Fund Taxpayers, and IRM 5.7.8.3,Pyramiding Trust Fund Taxpayers.

      • Enforcement action has taken place within the last 180 days or a warning of enforcement has been given in the last 180 days. Enforcement action only includes seizures and notices of levy where the taxpayer should realize there has been enforcement.

        Example:

        A notice of levy is sent to an employer and it is returned because the taxpayer no longer works there. This notice of levy does not start the count for a new 180 day period because the taxpayer would be unaware of the levy.

        Example:

        A levy is sent to a bank and a copy is sent to the taxpayer. Even if no proceeds are received, the taxpayer would be aware of the levy action.

    3. This new warning of enforcement is in addition to the notices described in IRM 5.11.1.2.1., Required Notices, that are required by law and must have been sent at some point. An oral warning to pay is not adequate to allow a notice of levy to be served if there has never been a 30 day Notice of Intent to Levy and Notice of Your Right to a Hearing.

    4. If the most recent warning of enforcement or enforcement action is over 180 days old, give the taxpayer a new warning before taking enforcement. This means that over the life of the liability, there may be a need to give this warning more than once.

      Example:

      An L1058 is issued to a taxpayer, followed by a notice of levy. After 180 days pass with no additional enforcement action or warning of enforcement, a new warning needs to be given before another notice of levy or a seizure, unless one of the exceptions in (b) exists. Then, a new 180 day count begins.

  3. The required notices in IRM 5.11.1.2.1 must have been sent for every taxable period or module that is included in a notice of levy. The taxpayer has had timely notice as long as there has been a recent warning of enforcement or enforcement action for at least one liability included in a notice of levy within the last 180 days. In other words, the requirement for the notices in IRM 5.11.1.2.1 must be met for each liability included in a notice of levy, but the new warning of enforcement is for the entity rather than each liability.

    Example:

    The required notices (Notice and Demand, Notice of Intent to Levy and Notice of Your Right to a Hearing) have been sent for all modules included in the notice of levy. They are over 180 days old and there has been no enforcement action or warning of enforcement, so the taxpayer is given a new oral warning of enforcement. After the 15 day deadline passes, a new module is received for which a notice of intent to levy and notice of the right to a hearing had been sent more than 30 days ago, so the legal requirement for this module has been met. A new warning is not necessary, even if the notice of intent to levy and notice of the right to a hearing for this new module had been sent more than 180 days earlier, because the taxpayer was warned of enforcement within the last 180 days.

  4. If the taxpayer cannot be located, the required notices still must have been sent to the last known address. However, additional notices for these liabilities do not have to be sent to the last known address just to meet the timeliness requirement.

5.11.1.2.2.8  (02-03-2012)
Invalid Collection Due Process Notice and Rescinding a Valid Collection Due Process Notice

  1. If a Collection Due Process Notice (CDP) levy notice is invalid, a substitute notice must be issued in order for the taxpayer to be entitled to a hearing. Situations warranting the issuance of a substitute CDP notice because the CDP levy notice was invalid include when the taxpayer:

    1. Did not receive a CDP notice because it was not sent to the taxpayer’s last known address (in which case the notice is invalid). If the taxpayer makes a timely hearing request from the invalid notice, a substitute notice need not be issued.

    2. Is in bankruptcy and the automatic stay prohibits the issuance of collection notices and collection by levy (in which case the CDP notice is treated as void and is invalid). Issue the substitute CDP notice when the automatic stay is no longer in effect.

    3. Did not receive a CDP notice because it was not sent individually to each joint filer. A notice may be valid as to one or both of the joint filer(s) if there is proof that person actually received the notice or that person timely requested a CDP hearing.

  2. A valid CDP levy notice issued in error can be rescinded but only if:

    1. the rescission is accomplished before the expiration of the time period in which the taxpayer may request a CDP hearing; and

    2. the taxpayer has not requested a CDP hearing.

  3. You should rescind a valid CDP notice during the 30-day period for requesting a CDP hearing, before you receive a taxpayer’s hearing request, if you learn that the notice was issued when the case is in a status in which levy action is prohibited.

    Note:

    Situations where levy action is prohibited include a pending installment agreement (IA) request, pending offer-in-compromise (OIC), pending innocent spouse claim and while an installment agreement is in effect.

  4. You may rescind a valid CDP notice issued while a taxpayer is in a combat zone or if the taxpayer enters a combat zone within 30 days after the Service issues a valid CDP notice if the taxpayer has not yet requested a hearing and the time period for requesting a hearing remains open. (The notice may be rescinded, but it need not be.) For the purpose of calculating the 30-day period for requesting a CDP hearing, IRC section 7508 disregards the time spent in a combat zone, plus any related hospitalization, plus 180 days. If the taxpayer has requested a hearing, the Service cannot rescind the CDP notice but the Service shall delay the CDP hearing in accordance with IRC section 7508.

  5. Once the 30-day period has expired after the issuance of a valid CDP notice, the taxpayer has been afforded his opportunity for a hearing, and the notice may not be rescinded.

  6. Use Letter 3876, Rescission of Collection Due Process Levy Notice, to notify the taxpayer. The letter explains the Notice of Intent to Levy and Notice of Your Right to a Hearing is rescinded and as a result any CDP hearing request received is disregarded. It also explains that the taxpayer’s CDP hearing rights are preserved.

  7. When the notice is rescinded or invalid, input Transaction Code (TC) 972, Action Code 069, to reverse each TC 971 that has already been input for the rescinded letter or invalid notice. The input date for each TC 972 must be the same as the date for the TC 971 it is reversing.

  8. Once a taxpayer requests a CDP hearing following a valid notice that has not been previously rescinded, Appeals must conduct the hearing and issue the notice of determination, unless the taxpayer withdraws the hearing request. Pending OICs, requests for IAs or innocent spouse relief and combat zone CDP hearing requests should be worked by Appeals in the CDP or equivalent hearing if the taxpayer requests a hearing.

    Note:

    IRM 8.22.5.4.2.4.2(2) provides the procedures Appeals should follow if the taxpayer requests a CDP hearing when collection by levy is prohibited

5.11.1.2.2.9  (12-11-2009)
Verification of Notice of Intent to Levy/Notice of a Right to a Hearing

  1. A record will be made in the ICS history showing when and how the Notice of Intent to Levy and Notice of Your Right to a Hearing is given to the taxpayer. This will be automatically generated by ICS when the input described in IRM 5.11.1.2.2.2 is done.

  2. If the notice is mailed, the Postal Service's rubber stamp imprint on a Certified Mail Receipt (Postal Service Form PS 3800) or a Certified Mail Book (Form PS 3877) is desirable to verify the mailing. However, getting the form stamped may not be practical, e.g., the nearest Post Office may be many miles from a remote post of duty. Even if the postal stamp is not obtained, keep the unstamped Certified Mail Receipt in the case file.

  3. If the notice is delivered by the Postal Service, the return receipt (PS Form 3811) should come back. If the notice is not delivered, the envelope with the attached return receipt should come back.

    Keep the return receipt or the undelivered envelope (with the attached return receipt) in the case file. These can serve as proof that the notice was mailed. When neither the return receipt nor the envelope is returned, verification can be made within six months through the Postal Service's web site at http://www.usps.com/. The Track and Confirm information at this website should be printed and maintained in the file to show the Postal Service's receipt of the certified mailing, delivery attempts, delivery result, and return of the mail item where delivery was not accomplished.

5.11.1.2.2.10  (07-26-2002)
Waiver of Notice of Intent to Levy/Notice of a Right to a Hearing

  1. Occasionally, a taxpayer may want the Service to issue a notice of levy quickly.

    Example:

    The taxpayer is expecting another creditor to attach assets. The taxpayer may want the assets levied before the other creditor can attach them.

  2. Normally, a levy cannot be issued until an L1058 has been issued, and the waiting period has passed. However, in this situation, the taxpayer may have an incentive to waive the waiting period and the right to a hearing, so the notice of levy can be issued promptly.

  3. Waiver of this right must be informed and voluntary, or it is not a valid waiver. The waiver must be in writing.

  4. First, give the taxpayer an L1058, including all the enclosures so they have an opportunity to understand the rights they are waiving. Discuss those rights with the taxpayer and document the case history accordingly. Then, have the taxpayer sign Form 13207 , Waiver of Right to Receive a Collection Due Process Hearing under IRC 6330.

  5. If this form does not fit the situation, discuss the need for some alternative language with AIQ - Advisory, which may consult with Associate Area Counsel. The right to Collection Due Process must be waived in its entirety. Do not accept a proposed waiver that is restricted to allowing levy only on a specific asset or class of assets.

  6. Input the appropriate codes shown in IRM 5.11.1.2.2.2

5.11.1.2.2.11  (12-11-2009)
Issuing Notice of Intent to Levy for Child Support Obligation Bal Dues

  1. IRC 6305 provides that federal courts have no jurisdiction to restrain or review the assessment and collection of Child Support Obligation (CSO) Bal Dues. It also says that the assessment and collection are not, "...subject to review by the Secretary in any proceeding...."

  2. This means that Collection Due Process does not apply to these liabilities, so no notice of a right to a hearing (L1058) will be issued when CSO Bal Dues are being collected. Similarly, the taxpayer can neither request review under the Collection Appeals Program nor by the Taxpayer Advocate Service.

  3. Before a notice of levy can be issued to collect a CSO liability, there must be a

    • Notice and demand, and

    • Notice of intent to levy

  4. The notice and demand is issued at the campus when the liability is assessed.

  5. Use Letter 3524, Final Notice - Notice of Intent to Levy, Please Respond Immediately, instead of L1058. This is the notice of intent to levy for CSO Bal Dues. It is available as an ICS template. This must be given to the taxpayer, as described in IRM 5.11.1.2.1 If it is mailed, no return receipt is required.

  6. If the person who owes child support also owes tax, give L1058 to the taxpayer for delinquent tax modules, but do not include the child support obligation on this letter. Letters 1058 and 3524 can be mailed in the same envelope, but if that is done, a return receipt is required.

  7. Because L1058 has not been issued for the CSO Bal Dues, ICS will not allow the revenue officer to issue a notice of levy. Instead, this must be done by the group manager.

    Note:

    IRM 5.11.1.3.2.

5.11.1.2.2.12  (02-03-2012)
Issuing Notice of Intent to Levy/Notice of a Right to a Hearing for Consolidated Groups

  1. A consolidated group is an affiliated group of corporations connected through stock ownership in a parent-subsidiary relationship as defined in IRC 1504. The affiliated group may elect to file a consolidated income tax return to offset income and loses of the affiliates.

  2. The Treas. Reg. 1.1502-6(a) imposes on the common parent and each subsidiary of an affiliated group that files a consolidated tax return several liability for the tax of the consolidated group for that year. The Service may levy on the property of a subsidiary corporation for unpaid income tax liability of the consolidated group in these situations.

  3. When the determination is made to collect the income tax liability from the assets of the subsidiaries, the common parent and the subsidiaries must be listed on the L1058.

  4. ICS generally reflects the common parent name as it appeared when it was established on IDRS. Before generating the L1058 to the common parent, you must identify all the subsidiaries. Document the ICS case history.

  5. The name of the common parent and all the subsidiaries must be listed on the L1058. ICS limits the number of name lines that can be generated on the L1058; if the number of subsidiaries exceeds the number of name lines provided, the Service can list the names of the subsidiaries on an attachment to the L1058.

  6. The L1058 must be mailed to the common parent's last known address. The common parent is the only entity authorized to act for the subsidiary with respect to its several liability for the consolidated tax year. The common parent is the only entity with the right to participate in a CDP hearing on behalf of a subsidiary member of the group.

5.11.1.2.3  (06-29-2001)
Delegation Orders

  1. See Servicewide Delegation Order 5–3 (Rev. 1), Levy on Property in the Hands of a Third Party (not to include Levy Form 668-B) at IRM 1.2.44.3,Delegation Order 5–3 (Rev. 1) (Formerly DO-191 Rev. 3).

5.11.1.2.4  (12-11-2009)
Managerial Approval

  1. Certain notices of levy must be approved by managers. See Servicewide Delegation Order 5–3 (Rev. 1) (formerly DO 191, Rev. 3).

  2. When submitting a notice of levy for approval, include the following information:

    • A summary of any information the taxpayer has provided that may affect the decision to levy, e.g., claims that the assessment is wrong

    • If the taxpayer has submitted such information, explain your analysis of that information and why the notice of levy should still be served

    • Verification that the amount is still owed, e.g., IDRS confirms the amount is still unpaid

    • An explanation that the notice of levy is appropriate in consideration of the amount owed and any circumstances that are known about the taxpayer and the liability

    • Other collection alternatives considered and rejected

  3. Consider the following when determining if the levy is appropriate,

    • The taxpayer's responsiveness to attempts at contact and collection

    • Anything that is known about the taxpayer's financial condition

    • The taxpayer's compliance history

    • The taxpayer's effort to pay the tax

    • Whether current taxes are being paid

  4. This information must be in writing, but the format can be at local management discretion.

  5. The approval must also be in writing, but the method can be at local management discretion. Either the manager must write the approval in the ICS history, or a copy of the manager's written approval must be kept in the case file.

    Example:

    The revenue officer and manager are at the same location, so the notice of levy is turned in to the group manager who signs the levy. A copy of the notice of levy, with the manager's signature on it, is put in the case file.

    Example:

    The revenue officer and manager are at the same location, so the revenue officer signs the notice of levy and turns it in to the manager who initials it to show it has been approved. A copy of the notice of levy, with the manager's initials on it, is put in the case file.

    Example:

    The revenue officer and manager are at different locations. The revenue officer writes an explanation of why the notice of levy should be approved on a copy of the first page of the levy form, includes an "Approved" line on it, and faxes this to the manager. The manager signs on the "Approved" line, and faxes this back to the revenue officer who puts this in the case file to document the approval, and then the revenue officer signs the notice of levy.

    Example:

    The revenue officer and manager are at different locations. The revenue officer faxes a copy of the first page of the notice of levy to the manager who signs it and faxes it back to the revenue officer. The revenue officer places this in the case file to document the approval, and then the revenue officer signs the notice of levy.

    Example:

    The revenue officer sends the manager an encrypted E-mail message asking for approval of the notice of levy. The manager accesses the ICS case and records a decision in the ICS history. The manager’s ICS case access generates a notification alerting the revenue officer of the manager's action. If approved, the revenue officer will print and sign the notice of levy.

  6. A notice of levy that requires the approval of the SB/SE Collection Area Director must include a memo explaining the information in (2). If all levels approve the notice of levy, but the Director rejects it, the rejection must be in writing and explain the reason(s). Maintain copies of all approvals and rejections in the case file.

  7. If a courtesy levy is involved, indicate the required manager has approved of the notice of levy.

5.11.1.2.5  (12-11-2009)
Approval of Alter Ego and Nominee Notices of Levy

  1. Notices of levy that name alter egos or nominees often involve complex issues and are likely to result in litigation.

  2. See IRM 5.12.2.6.5,Preparing Nominee Liens, and IRM 5.12.2.6.7,Alter Ego Liens, as well as, IRM 5.17.2.5.7.1,Alter Ego Liens, and IRM 5.17.2.5.7.2,Nominee Liens, for guidance about whether the facts support such a determination.

  3. Request for Alter Ego and Nominee Notices of Levy require group manager approval. Forward group manager approved request to AIQ - Advisory for review. AIQ - Advisory will review and forward the group manager approved request to Area Counsel or Associate Area Counsel (SBSE) for concurrence.

    Note:

    If the group manager determines the case requires expedited treatment and either an expedited AIQ - Advisory review is not available or counsel was previously involved in the case then forward group manager approved request to Area Counsel or Associate Counsel (SBSE) for concurrence and provide AIQ - Advisory with a copy of the manager approved request and the counsel approval or disapproval.

  4. With Counsel concurrence, the notice of levy can be issued by GS-09 and above Revenue Officers, GS-12 AIQ - Insolvency employees and AIQ - Advisors. See Servicewide Delegation Order 5-3 (Rev. 1) (formerly DO-191, Rev. 3) at IRM 1.2.44.3,Delegation Order 5–3 (Rev. 1) (Formerly DO-191 Rev. 3) for the complete list of employees with the delegated authority to issue such levies.

  5. Do not issue notices of levy listing alter egos or nominees without first getting legal review, advice, written direction, and approval from Associate Area Counsel (SBSE) as to the,

    • Issuance of the levy

    • Language to be included on pre-levy notices and the notice of levy

5.11.1.3  (06-29-2001)
Restrictions on Levy

  1. This subsection contains restrictions on levy. See IRM 5.1.9.3.5,Levy Action during the Period of the CDP or Equivalent Hearing, regarding restrictions on levy during CDP hearings.

5.11.1.3.1  (07-01-2004)
Property Exempt from Levy

  1. IRC 6334(a) describes property that is exempt from levy. The exempt levy sources include:

    • Unemployment benefits

    • Certain annuity and pension payments, including payments under the Railroad Retirement Act, Railroad Unemployment Insurance Act, Special Pensions for Medal of Honor Winners, and Retired Serviceman's Family Protection Plan and Survivor Benefit Plan

    • Workers Compensation

    • Judgments for support of minor children, if the judgment is before the date of the levy

    • Certain military service-connected disability payments

    • Certain public assistance payments

    • Assistance under the Job Training Partnership Act

    Note:

    IRS 6331(h) allows for levy on 15% of certain previously exempt government payments only under the Federal Payment Levy Program. See IRM 5.11.7.2,Federal Payment Levy Program, for additional information about levies issued under IRC 6331(h).

  2. In addition to these exempt sources of income, a portion of a taxpayer's wages, salary, and other income is exempt from levy under IRC 6334. See IRM 5.11.5.4,Exempt Amount, for additional information about this exemption.

  3. See IRC 6334(a) for information about other property types exempt from levy.

  4. Other than property listed in IRC 6334(a), no property is exempt from levy. No state or local law can exempt property from levy to collect federal tax.

    Example:

    Even if property is exempt under a state homestead exemption law, it is not exempt from federal levy.

5.11.1.3.2  (07-26-2002)
Property Exempt from Levies Used to Collect Child Support Bal Dues

  1. When child support Bal Dues are being collected, three of the items in IRM 5.11.1.3.1 are not exempt from levy IRC 6305(a)(2). They are:

    • Unemployment benefits

    • Certain annuity and pension payments

    • Amount of income needed to pay a judgment for the support of minor children, however, income withheld for a judgment for child support is not levied, if the judgment is dated before the levy.

  2. Use Letter 1696(CG), Property Exempt From Levy Levied to Collect Child Support, to explain the exemptions that do not apply for child support levies.

  3. IRM 5.11.1.2.2.10.

5.11.1.3.3  (07-01-2004)
Property in the Hands of the Courts

  1. IRC 6332(a) provides that property subject to attachment or execution under any judicial process is not subject to levy. Also, the IRS generally does not levy on assets in the custody or control of a court because that would interfere with the court proceeding.

  2. Generally, if the taxpayer is in bankruptcy or state insolvency proceedings, do not levy assets in the hands of the court to collect the tax that this person owes. However, a levy can be served to attach assets the court may distribute to another person who is the taxpayer's creditor.

    Caution:

    Fred Green is a delinquent taxpayer who files bankruptcy. Fred's assets are in the hands of the court to determine which of Fred's creditors will be paid and how much. While this is underway, generally, a levy will not be served on the court in an attempt to take any of these assets to collect Fred's tax. However, Joe Blue is one of Fred's creditors, and Joe also owes delinquent tax. A levy can be served on the trustee to attach Joe's fixed and determinable right to assets that may be distributed to him.

    Caution:

    Do not levy without getting advice from AIQ - Insolvency when there is a current bankruptcy condition or the taxpayer states taxes were discharged in a prior bankruptcy. Bankruptcy laws allow debtors to sue the Service for damages and attorney fees when the automatic stay or discharge injunction is violated. Information on the Insolvency employee to contact can be found at SERP, Who/Where, Insolvency (Bankruptcy) National Field/Centralized Site Directory,

    http://serp.enterprise.irs.gov/databases/who-where.dr/inslvncy-bnkrptcy/national_insolvency_field.htm

    Caution:

    Contact AIQ - Advisory regarding levy on property that is or may be in the control of a probate court.

  3. Property may have been seized before the taxpayer began court proceedings. In non-bankruptcy cases, this may affect whether the property can be sold. Contact AIQ - Advisory for advice. In bankruptcy cases, property that has not been sold may have to be turned over to the bankruptcy estate. Contact AIQ - Insolvency in your territory for advice.

  4. Even if property is being used as evidence in a criminal court, it can be levied.

    1. Serve the levy on the official responsible for holding and releasing the property, e.g., police property clerk.

    2. Advise this person not to surrender the property until the court releases it.

5.11.1.3.3.1  (12-11-2009)
Cash Deposited as Security for Bail

  1. Issue a notice of levy on cash deposited as security for bail only if collection is at risk. The territory manager or an AIQ - Advisory territory manager must approve the levy.

  2. If a levy is served, tell the Court Clerk to respond when the taxpayer no longer requires a bond.

  3. If collection is not at risk, do not levy. Instead, ask the Court Clerk to notify IRS when the bond is no longer required. Then decide whether to levy the bond before it is returned to the taxpayer.

5.11.1.3.3.2  (06-29-2001)
Forfeited Property

  1. Sometimes, property used in a crime or acquired through crime is forfeited.

    Example:

    Criminal Investigation may seize money used in violating the law. This may be subject to judicial forfeiture.

  2. If property can be forfeited in a federal proceeding, it will not be levied. However, Criminal Investigation may alert Collection to levy property if the property will not be forfeited. In a state or local forfeiture, contact Associate Area Counsel to determine whether the federal tax lien encumbers the property under IRC 6323(i)(3), which would allow the IRS to levy the property.

5.11.1.3.4  (12-11-2009)
Property Outside the United States

  1. Notices of levy should only be served within the United States, including the District of Columbia and U.S. territories (also known as possessions), collectively referred to as the "U.S."

  2. If the taxpayer is outside the U.S., but there are assets within the U.S., the assets can be levied.

  3. A notice of levy shall never be served outside the U.S. Also, never serve a levy at the embassy, consulate, or mission of another country, even if it is physically located within the U.S. See IRM 5.11.6.9 ,United Nations (UN) Employees' Income, for levies served at the United Nations.

  4. A notice of levy can be served at the U.S. branch of a foreign bank and can reach funds held there. In limited circumstances, the levy may also reach funds in branches outside the U.S., but only when the notice of levy specifies that such funds are intended to be reached. See 26 CFR 301.6332-1(a)(2). Contact AIQ - Advisory and Associate Area Counsel for advice.

  5. If a cross-border bankruptcy case has been filed under Chapter 15 of the United States Bankruptcy Code, determinations may be made in such cases that result in the repatriation of assets located overseas. See generally IRM 5.9.7.2, Chapter 15-Cross-Border Insolvency.

  6. The U.S. treaties with Canada, Denmark, France, Netherlands, and Sweden permit the United States and the other country to collect taxes on behalf of each other. See IRM 5.1.8.7.7,Incoming Mutual Collection Assistance Requests (MCARs).

5.11.1.3.5  (12-11-2009)
Appearance Date of Summons

  1. Do not levy on the day the taxpayer must appear for a summons that was issued to secure information to collect delinquent tax. For example, when a taxpayer is summoned to provide information to complete a Collection Information Statement. See IRC 6331(g).

  2. Even if a summons is issued for another reason, do not levy on the appearance date. For example, there may be Bal Dues and Del Rets on the same taxpayer. The summons could be issued for the unfiled return.

  3. You are not expected to contact other divisions to ask if they have summoned the taxpayer.

  4. If collection is in jeopardy, a levy can be issued on the summons appearance date. Collection is only in jeopardy if one of the conditions allowing a jeopardy assessment exists. See Policy Statement P–4–88 at IRM 1.2.13.1.27.

    1. The territory manager or an AIQ - Advisory territory manager must approve the jeopardy levy. Also secure the concurrence of the responsible Area Counsel or Associate Area Counsel.

    2. If the notices described in IRM 5.11.1.2.1 have been sent, and the time periods for them have passed, the appeal process in IRM 5.11.3.6,Appealing the Jeopardy Levy, does not apply. The taxpayer can discuss the levy with the group manager, the Taxpayer Advocate Service, or Appeals.

    3. If the notice requirements have not been satisfied, see IRM 5.11.3,Jeopardy Levy Without a Jeopardy Assessment, for required procedures and approval level.

5.11.1.3.6  (01-19-1999)
Banks under FDIC (Formerly RTC) Control

  1. The Service made an agreement with the Resolution Trust Corporation (RTC) about amounts owed by banks under RTC control. A notice of levy will not be used to collect these amounts.

  2. The board of directors of the RTC was abolished in 1991 and the RTC ceased operation in 1993. The Federal Deposit Insurance Corporation (FDIC) took over RTC's functions. The RTC agreement continues to apply to banks under FDIC's control.

5.11.1.3.7  (12-11-2009)
Repeated Levies on the Same Source

  1. Exercise caution when levying repeatedly on the same source

  2. Per Policy Statement P–5–28, at IRM 1.2.14.1.5, while the Code allows for the service of as many successive levies on the same source as necessary to satisfy the tax liability, judgment should be exercised to avoid undue hardship on the taxpayer and/or the taxpayer's family.

5.11.1.3.8  (01-19-1999)
Government Training Allowances

  1. Some individuals receive payment for government training programs to develop skills so they can get jobs. Except for payments under the Job Training Partnership Act, these payments are not exempt from levy; however, levying them would defeat the purpose of the programs so these payments will not be levied.

  2. See Policy Statement P–5–33 at IRM 1.2.14.1.7.

5.11.1.3.9  (02-03-2012)
Pending & Active Installment Agreements

  1. If the taxpayer makes an offer to pay a liability through installments, no levies can be served while the proposal is pending.

    Note:

    An unreversed Transaction Code (TC) 971, Action Code (AC) 043 means there is a pending installment agreement. This can be reversed by a TC 972, AC 043. If the pending agreement becomes an active agreement, there will also be a TC 971, AC 063, in which case both the pending and active installment agreement coding are reversed by a TC 971, AC 163.

    Exception:

    A levy can be served if the taxpayer waives the restriction in writing.

    Exception:

    A levy can be served if collection is in jeopardy. Collection is only in jeopardy if one of the conditions allowing a jeopardy assessment exists. See Policy Statement P–4–88 at IRM 1.2.13.1.27.

    • The territory manager or an AIQ - Advisory territory manager must approve the jeopardy levy.

    • Secure Area Counsel or Associate Area Counsel (SBSE) concurrence before issuing the levy

    • If this happens while a rejected installment agreement is being appealed, notify Appeals of the jeopardy determination.

    • If the required notices have been sent, and the time periods for them have passed, the appeal process in IRM 5.11.3.6,Appealing the Jeopardy Levy, does not apply. The taxpayer can still discuss the levy with the group manager, the Taxpayer Advocate Service, or the Appeals Officer.

    • If the notice requirements in IRM 5.11.1.2.1 have not been satisfied, see IRM 5.11.3,Jeopardy Levy Without a Jeopardy Assessment, for required procedures and approval level.

  2. In addition to the period that an offer of an installment agreement is pending, no levy can be served,

    • For 30 days after an offer of an installment agreement is rejected

    • While a rejection of a proposed agreement is being appealed

    • While an agreement is in effect

    • For 30 days after notifying a taxpayer that an agreement has been defaulted and will be terminated, i.e., CP523 or Letter 2975, Notice of Defaulted Installment Agreement Under IRC 6159(b)

    • For an additional 30 days after an agreement is terminated

    • While termination (or proposed termination) of an agreement is being appealed.

      Caution:

      Before levying, wait an additional 15 days after each of these 30 day periods to allow for receipt of a timely mailed appeal.

      Note:

      Status 60 or an unreversed TC 971, AC 063 means there is an active installment agreement. This is reversed by TC 971, AC 163.

    Exception:

    The same as in (1), above.

  3. By contrast, if a levy was issued BEFORE an installment agreement is entered into, it must be released, unless the installment agreement provides otherwise. See IRC 6343(a)(1)(C). If a levy was served and then the taxpayer offers to pay in installments, the levy does not have to be released while negotiations for the installment agreement are pending.

  4. If an offer of an installment agreement is made merely to delay collection, levies can be served to collect the tax (Treas. Reg. 301.6331-4(a)(4)).

    1. If the notices described in IRM 5.11.1.2.1 have been issued, and the time periods after them have passed, jeopardy is not required, and the appeal process in IRM 5.11.3.6,Appealing the Jeopardy Levy, does not apply. The taxpayer can discuss the levy with the group manager, the Taxpayer Advocate Service, or Appeals.

    2. If the notice requirements in IRM 5.11.1.2.1, have not been satisfied, the jeopardy levy procedures in IRM 5.11.3, Jeopardy Levy Without a Jeopardy Assessment, must be followed.

    Caution:

    The determination that the offer of an installment agreement is merely to delay collection must be apparent to any impartial observer, i.e., there is clearly no reality to the offer. The Revenue Officer must secure group manager concurrence regarding the solely to delay collection determination. See IRM 5.14.3.2(5).

    Example:

    The taxpayer offers to make a periodic, token payment such as $1 a month.

    Example:

    A taxpayer offers to make installment payments. The agreement is rejected. The taxpayer then offers to increase the proposed agreement by a token amount, such as $1.

5.11.1.3.10  (12-11-2009)
Refund Litigation

  1. Responsibility for refund litigation depends on who is suing and the type of tax involved.

    1. AIQ - Advisory is responsible for refund litigation if a suit is filed by a third party regarding a Trust Fund Recovery Penalty assessment.

    2. The campus refund litigation unit is responsible for all other refund litigation.

  2. For tax periods that began before January 1, 1999, if the taxpayer files a suit for a refund of divisible taxes, AIQ - Advisory or the campus refund litigation unit determines whether collection is suspended during the suit. For further information about refund suits, see IRM 25.3,Litigation and Judgments.

    1. Divisible taxes include employment taxes, trust fund recovery penalties, excise taxes (except chapters 41-44 taxes), and abusive tax shelter penalties.

    2. Unlike other taxes where full payment is required in order to sue for a refund, the taxpayer need pay only a portion of the amount owed before filing suit for refund, so this refund litigation happens while there still is an amount owed.

    3. Collection does not have to be in jeopardy, as long as the pre-levy notice requirements of IRM 5.11.1.2.1 have been satisfied. Get Associate Area Counsel's approval because of their ongoing involvement in the case and keep AIQ - Advisory apprised of case developments. The territory manager or an AIQ - Advisory territory manager must also approve the levy.

  3. Generally, for tax periods beginning after December 31, 1998, no levy can be served to collect certain divisible taxes that are included in a suit for refund.

    1. This change only applies to employment taxes and trust fund recovery penalties for employment taxes.

    2. For trust fund recovery penalties for other taxes, continue to follow (2), above.

  4. If collection is in jeopardy, levies can be issued to collect the tax.

    1. If the notice requirements of IRM 5.11.1.2.1 have not been satisfied, see IRM 5.11.3,Jeopardy Levy Without a Jeopardy Assessment, for required procedures and approval level of the jeopardy levy

    2. If the notice requirements of IRM 5.11.1.2.1. have been satisfied, the jeopardy levy must be approved by the territory manager or an AIQ - Advisory territory manager. It must also be approved by Associate Area Counsel. Keep AIQ - Advisory apprised of case developments. The appeal process in IRM 5.11.3.6,Appealing the Jeopardy Levy, does not apply. The taxpayer can still discuss the levy with the group manager, the Taxpayer Advocate Service, or Appeals.

    Exception:

    If the taxpayer waives the restriction on levy in writing, levies can be issued to collect the tax.

    Note:

    If collection is in jeopardy or the taxpayer waives the restriction on levy in writing, notify AIQ - Advisory Review that collection is not being withheld.

  5. A levy that was issued before the suit was filed does not have to be released. Contact Associate Area Counsel (SBSE) for advice about whether to release the notice of levy. If necessary, tell the person who received the levy to delay sending any proceeds until Counsel's advice is received. Keep AIQ - Advisory apprised of case developments.

5.11.1.3.11  (06-29-2001)
Due Process for Lien Filing

  1. Generally, within five business days after a Notice of Federal Tax Lien (NFTL) is filed, Letter 3172(DO), Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320, is sent to taxpayers to tell them about the NFTL and allow them a chance for a CDP hearing about the lien. See IRM 5.12.1,Lien Appeals.

  2. If the notice requirements in IRM 5.11.1.2.1 have been satisfied, Letter 3172(DO) does not create a new waiting period before a notice of levy can be issued. However, once the taxpayer appeals the lien filing, generally as a matter of policy, no notices of levy will be issued during the administrative or judicial appeal. See IRM 5.1.9.3.5,Levy Action during the Period of the CDP or Equivalent Hearing, for a description of when property can be levied during the appeal of an NFTL filing.

    Example:

    On April 5, 1999, a Notice of Federal Tax Lien is filed, and Letter 3172(DO) is sent to the taxpayer on April 7. The taxpayer appeals the NFTL on April 29. Until April 29, as long as the notice requirements in IRM 5.11.1.2.1 have been satisfied, a notice of levy can be issued to collect the amount that is owed, including the periods that are included in Letter 3172(DO).

5.11.1.3.12  (12-11-2009)
Offers in Compromise

  1. Notices of levy cannot be served while an offer in compromise is pending, within 30 days after an offer is rejected, or while a rejected offer is being appealed. Ensure that the offer in compromise has been closed before issuing the levy.

    Caution:

    After the 30 days run out following rejection of the offer, before levying allow an additional 15 days for receipt of a timely mailed appeal.

    Exception:

    Notices of levy can be served if collection is in jeopardy. If this happens while a rejected offer is being appealed, notify Appeals of the jeopardy determination.

    • The territory manager or an AIQ - Advisory territory manager must approve the jeopardy levy.

    • Secure Area Counsel or Associate Area Counsel (SBSE) concurrence before issuing the levy

    • If the notices described in IRM 5.11.1.2.1 have been sent, and the time periods have passed, the appeal process in IRM 5.11.3.6,Appealing the Jeopardy Levy, does not apply. The taxpayer can discuss the levy with the group manager, the Taxpayer Advocate Service, or Appeals.

    • If the notice requirements in IRM 5.11.1.2.1 have not been satisfied, see IRM 5.11.3,Jeopardy Levy Without a Jeopardy Assessment, for required procedures and authority level.

    Exception:

    Notices of levy can be served if the taxpayer waives the restriction in writing.

  2. See IRM 5.8.3.8.1,Offers Submitted Solely to Delay Collection per Forms 657.

  3. If an offer in compromise is made solely to delay collection, levies can be served to collect the tax. The provisions in IRM 5.11.1.3.9 also apply to such levies.

5.11.1.3.13  (07-01-2004)
Special Treasury Fund

  1. Members of the military and Public Health Service employees may deposit money in a Special Treasury Fund, while they are outside the U.S. and its possessions.

  2. Get advice from Associate Area Counsel (SBSE) before attempting to levy money in the Special Treasury Fund. Keep AIQ - Advisory informed in light of the potential for litigation and wrongful levy actions.

    Note:

    Refer Counsel to Subsection 1035 of Title 10 of the U.S. Code.

5.11.1.3.14  (02-03-2012)
Indian Tribal Governments

  1. When a determination is made to levy the assets of a tribal government the employee should coordinate as required with the Indian Tribal Government (ITG) specialist. See IRM 5.1.12.24.2,Indian Tribal Government Procedures.

  2. The Service must comply with Presidential Executive Orders regarding Tribal Sovereignty and the ITG specialist can assist the employee with case-related technical issues specific to Indian tribes.

5.11.1.4  (12-11-2009)
Post-Levy Actions - Disqualified Employment Tax Levy

  1. This section contains guidance on post-levy actions for a disqualified employment tax levy.

5.11.1.4.1  (12-11-2009)
Legal Authority

  1. The Small Business and Work Opportunity Tax Act of 2007 modified the collection due process (CDP) procedures for certain employment tax liabilities. This Act amended IRC 6330(f) to permit issuance of a Disqualified Employment Tax Levy (DETL) for collection of certain employment taxes without first giving the taxpayer pre-levy CDP notice. This amendment is effective for such levies served on or after September 22, 2007 and relates to Forms 941, 943, 944, 945, 940, and CT-1.

    6330(h) DISQUALIFIED EMPLOYMENT TAX LEVY. —For purposes of subsection (f), a disqualified employment tax levy is any levy in connection with the collection of employment taxes for any taxable period if the person subject to the levy (or any predecessor thereof) requested a hearing under this section with respect to unpaid employment taxes arising in the most recent 2-year period before the beginning of the taxable period with respect to which the levy is served. For purposes of the preceding sentence, the term employment taxes means any taxes under chapter 21, 22, 23, or 24.

5.11.1.4.2  (12-11-2009)
Disqualified Employment Tax Levy (DETL)

  1. IRC 6330(h) describes a DETL, as any levy for the collection of employment taxes relating to a taxable period for which the taxpayer or the taxpayer's predecessor requested a hearing under IRC 6330 for unpaid employment taxes that arose within the two-year period before the beginning of the period for which the levy is served. Generally, employment taxes include FICA, FUTA, and withheld income taxes.

    When a DETL is served, the taxpayer will be given post-levy CDP rights. The taxpayer may seek Tax Court judicial review of the determination resulting from the post-levy hearing.

  2. A DETL is comprised of these three components:

    1. Levy served to collect employment taxes,

    2. Taxpayer or its predecessor previously requested a CDP levy hearing relating to employment taxes,

      Note:

      See IRM 5.1.9.3.15 (3),Disqualified Employment Tax Levy, for help in determining if the taxpayer requested a prior CDP levy hearing involving unpaid employment taxes.

    3. The prior CDP hearing related to unpaid employment taxes that arose within the two-year period prior to the beginning of the period for which the levy is served.

      Note:

      See IRM 5.1.9.3.15 (4),Disqualified Employment Tax Levy, for help in determining if the hearing request involved employment taxes arising and ending within the two-year period before the beginning of the taxable period for which the DETL is served.

5.11.1.4.3  (02-03-2012)
Predecessor Determination

  1. Determine whether a business is a predecessor business for the purpose of IRC 6330(h) by applying the following factors:

    1. The taxpayer has substantially the same owner(s) or shareholder(s) and the same officer(s) as the prior business.

    2. The same individual(s) are actively involved in running the taxpayer that were actively involved in running the prior business, regardless of whether they are officially listed as the owners/shareholders/ officers.

    3. There is no evidence that the taxpayer’s owner(s) or shareholder(s), if different than before, acquired the business in an arms-length transaction for fair market value.

    4. The taxpayer provides substantially the same product(s), service(s), or function(s) as the prior business.

    5. The taxpayer has substantially the same customers as the prior business.

    6. The taxpayer has substantially the same assets as the prior business.

    7. The taxpayer has the same location/telephone number/fax number, etc. as the prior business.

      Caution:

      No one factor is determinative. A tax-avoidance motivation for the change is not a requirement.

  2. A business will not be considered a predecessor if there has been a genuine change in control and ownership of the business. A genuine change in control and ownership of the business is present if :

    • It was acquired in an arm’s length transaction for fair market value, and

    • The previous owner(s) has (have) ceased all involvement in running the business

  3. If the previous owner serves for a limited period as a consultant to the new business solely in an advisory capacity, then the prior owner should not be deemed to have any involvement in running the new business.

    Example:

    Pike Company, in the business of selling equipment, was owned by John Doe. After Pike Company failed to pay employment taxes for several quarters in 2007, the Service sent Pike Company a CDP notice. Pike Company requested a CDP hearing. After the CDP hearing, John Doe formed Robin Inc., which also sold equipment. Robin Inc. used the same supervisors, sold the same equipment, was in the same location and had the same phone number, as Pike Company. Pike Company is a predecessor of Robin Inc.

    Example:

    Salmon Company, in the business of storage, was owned by John Q. Public. After Salmon Company failed to pay employment taxes for several quarters in 2008, the Service sent a CDP notice to Salmon Company. Salmon Company requested a CDP hearing. After the CDP hearing, John Q. Public sold the assets of Salmon Company to Mary Doe for fair market value in an arm’s length transaction. Mary Doe used these assets to form Trout Inc., which also engaged in the storage business and used the same employees and maintained the same customers, location, and phone number as Salmon Company. Mary Doe was not involved in the operation of Trout Inc. Salmon Company is not a predecessor of Trout Inc.

    Example:

    Tuna Company, in the business of providing childcare, was owned by Roberta Granite. After Tuna Company failed to pay employment taxes for several quarters in 2007, the Service sent a CDP notice to Tuna Company. Tuna Company requested a CDP hearing. After the CDP hearing, Roberta Granite’s daughter, Tammy Granite, formed Guppy Inc, which also provided childcare. Roberta Granite was actively involved in running Guppy Inc. Guppy Inc used the same supervisors, cared for the same children, was in the same location and had the same phone number, as Tuna Company. Tuna Company is a predecessor of Guppy Inc.

  4. Contact AIQ – Advisory for advice on questions regarding whether the taxpayer has meet the factors to be considered a “predecessor". AIQ – Advisory will consult with Associate Area Counsel, as needed.

  5. When it is determined that a predecessor previously requested a CDP levy hearing relating to employment taxes, the revenue officer will document the ICS history with the factors that supported the determination. The group manager or an AIQ – Advisory group manager must approve the determination of “predecessor" in the ICS History. The group manager signature on the levy is not required. See IRM 5.11.1.2.4 Managerial Approval.

5.11.1.4.4  (02-03-2012)
Issuing Notice of Levy/Notice of a Right to a Hearing in CFf

  1. When warranted, the Service may exercise its discretion to issue a pre-levy CDP notice for DETL periods; i.e., even where a taxpayer's employment tax liabilities meet DETL criteria.

    Example:

    The issuance of a pre-levy notice might be advisable if no IRC 6331(d) notice has been issued or there has been no contact with the taxpayer within the last 180 days.

  2. If the tax period meets the criteria for issuing a DETL and levy action is determined to be appropriate:

    • Make sure the IRC 6331(d), Notice of Intent to Levy, was properly issued.

      Note:

      This is the CP 504 notice or the "Status 58" notice. If the CP 504 notice was not issued, issue the pre-levy CDP notice, L1058. This meets the IRC 6331(d) and IRC 6330 requirement. If the CP 504 notice was not issued the DETL can only be issued 30 days after issuance of the L1058 per IRC 6331(d)

    • Document the ICS case history regarding the DETL determination, and

      Example:

      DETL to be issued for tax periods 01-200606 and 01-200609. TP qualifies for a DETL based on CDP levy hearing requested on 07/27/2007 for tax periods 01-200512 and 01 200603

    • Prepare and issue the DETL

      Note:

      ICS will block revenue officer issuance of the DETL unless the revenue officer answering yes when ICS prompts with the following: "Final Notice Delivery Date is not 30 days prior to levy. Is this a DETL levy? (Yes or No)?" This is a requirement because there is no TC 971 AC 069 on the module.

  3. If a DETL is served, send the post-levy CDP notice with the taxpayer's copy of the levy. Letter 1058-D, Notice of Levy and Notice of Your Right to a Hearing, is used to provide post-levy CDP rights.

    Caution:

    If the taxpayer received a pre-levy CDP notice (L1058) for the employment tax period(s) being levied, do not issue a post-levy CDP notice (L1058-D).

  4. Both the post-levy and/or pre-levy CDP notice must be:

    1. Given in person,

    2. Left at the taxpayer's home or business, or

    3. Sent to the taxpayer's last known address by certified or registered mail.

      Note:

      Use registered mail only if the taxpayer is outside the United States. There is no international certified mail.

      Note:

      Refer to IRM 5.11.1.2.1.1

      Exception:

      Where L1058-D has been correctly sent to the taxpayer's last known address and another address is subsequently found, do not send an additional L1058-D, relating to the same employment tax liability, to the new address.

      Exception:

      If L1058-D is mistakenly sent to an address other than the last known address, immediately send a new L1058-D to the correct last known address.

  5. Include a copy of the levy, Publication 594, Publication 1660 and Form 12153 with the L1058-D.

  6. If the L1058-D is issued more than 10-days after issuing the DETL, document the reason in the ICS history.

  7. DETL post-levy hearing requests are processed similarly to other hearing requests. Refer to IRM 5.1.9, Collection Appeal Rights, for guidance in processing hearing requests.

    Note:

    A DETL may be served during a timely requested pre or post-levy CDP hearing or judicial review of such hearing to collect employment tax liabilities (DETL tax periods) subject to the hearing.

    Example:

    Collection is a risk (e.g., taxpayer’s business is deteriorating or taxpayer is pyramiding).

    Note:

    See IRM 5.1.9.3.15 (7),Disqualified Employment Tax Levy, for help in determining actions or new information items that may affect the decision to levy.


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