What is an IRS LT11 Notice or Letter 1058 & the best way to respond
IRS Collection Notice of Intent to Levy & Your Rights to a Hearing
TLDR;
IRS LT11 Notice is the legal warning to you of a levy, garnishment, or other potential collection action by the IRS,
The IRS Lt11 notice includes information only about the tax year in question, the amount owed, any penalties or interest, and the due date for payment.
You can file an appeal with the office of appeal by requesting a CDP Hearing.
If you are not able to pay the full amount by the due date, the IRS may take further action to collect the debt.
You may qualify for Tax Relief or Settlement if you are unable to pay your tax debt
The IRS LT11 Notice or Letter 1058 is the notice before levy or collections the IRS may take, sent by Certified Mail.
The IRS LT11 Notice or Letter 1058 your final notice from the Internal Revenue Service indicating their intent to levy or seize your property because of overdue tax payments. This is the legal warning the IRS has to send before they have a right to begin collection action.
The letter is systematic & sent after the IRS had previously sent you the IRS CP504 Notice, and the tax balance has not been taken care of.
What are my rights to a hearing on an LT11 Notice?
Once you receive an LT11 or 1058 notice, taking action immediately is crucial. Ignoring this notice could lead to severe financial consequences. One of your immediate options is to request a Collection Due Process (CDP). A CDP Hearing is a request to settle your tax debt with the Office of Appeals. Collections are suspended while in the queue for a CDP. To timely file a request, you must do so within 30 days of the date of the IRS LT11 Notice.
What happens if I Did not request a CDP hearing on time?
If you missed the 30 days to file a CDP, then an Equivalent Hearing (EH) is applicable. However, an equivalent hearing does not suspend collections, and any decision cannot be petitioned to the tax court if there is a disagreement with the Office of appeals.
What happens once I have appealed the IRS LT11 & requested a CDP Hearing?
The IRS will assign an Appeals Officer, who will evaluate your request for tax relief. Most of the Tax Relief programs that are available are listed below. In your appeal, some of the IRS tax relief programs are based on your current finances. it's important to provide evidence of your financial situation. This could include your current income and expenses and any extenuating circumstances that could have led to your unpaid taxes. Be prepared to present your case to an impartial decision-maker who has no prior knowledge of your case
What happens if I do not respond to the IRS LT11 or 1058 Letter?
The IRS LT11 & 1058 Letter is the final warning letter, which now gives the IRS the authority to issue levies, garnishment or asset seizures. In addition, the IRS may file Federal Tax Liens & Certify serious delinquency with the State Departments. The certification will revoke your passport or deny renewals or applications. The following are the most common types of Levied Accounts:
Bank accounts
Wages, commissions, and other income
Business assets
Personal assets (including your car and home)
Social Security benefits
How can I resolve the IRS Taxes Due on the Lt11 Notice Besides a CDP Hearing?
The following are the most common ways to resolve your tax debt with the IRS:
Review the original tax return for errors & amend the tax return
Pay the balance in full ( & penalty forgiveness)
Temporary time to pay ( & Penalty Forgiveness)
Payment Plans ( & Penalty Forgiveness)
Penalty Forgiveness
Offer In Compromise
Non-Collectible Status - Financial Hardship Status
1. Review the original tax return for errors & amend the tax return
This step is always important, review your income and deductions and compare that with the tax return as filed.
Getting a second opinion from a different qualified tax professional is highly recommended. This might be the case if you either filed the original tax return yourself or you had the taxes filed by a seasonal tax preparer from one of the big box tax preparation companies.
The big chain tax prep companies hire seasonal preparers who are not experts in taxes. So, a second opinion would not hurt.
If there is an error in the tax return, you can correct the tax return and file an amended tax return. If this reduces or eliminates the balance that would be golden!
However, if the tax return is correct and amending the tax return is not an option, then you will have to review one of the other ways to fix the IRS balance.
2. Pay the balance in full ( & penalty forgiveness)
If the CP14 is accurate compared with the original tax filing, paying the taxes in full is an option. When making the payment, it can be made online with a checking account, or a credit card or send a payment through the mail by check or money order.
if you will be paying the balance off, you have to make sure you pay the correct tax year in question. If you just send a payment to the IRS without the tax year in question, the IRS might apply the payment to a different tax year, and you might just end up in collections.
Penalty forgiveness might also be available even if you pay off the balance in full. The forgiveness of penalties is detailed below.
3. Temporary time to pay ( & Penalty Forgiveness)
The IRS can grant you a temporary time to pay, up to 120 days to pay the balance in full.
You can request the IRS to grant you a certain amount of time to pay the taxes in full.
This option allows you 4 months to pay the balance. Keep in mind, only choose this option if you are 100% sure you can pay the IRS in the time frame requested.
Once you make the payment, you may qualify for the forgiveness of penalty which is detailed below.
4. Payment Plan ( & Penalty Forgiveness)
The IRS can grant you an installment agreement. There are different types of payment plans offered by the IRS. All of the payment plans once approved, will require you to file future tax returns on time, and not owe an additional amount.
If the balance is under $25,000, the IRS will accept a 72-month payment plan where you can make the payments yourself before the due date.
If the balance is over $25,000 and under $50,000 the IRS will also accept a 72 payment plan, however, the payments must be through direct debit from a checking account.
When the balance is over $50,000 and under $100,000 the IRS can accept an 84-month payment plan, however, they will file a federal tax lien against you.
Another option is to request a financial hardship payment plan. Under a hardship payment plan, the amount you owe to the IRS does not matter. What matters is only your current finances.
This method works like this: Let’s say you owe $100,000 ( One Hundred Thousand Dollars). However, you can only afford a payment of $50 (Fifty) per month.
The IRS will accept the payment plan, however, your financial situation will have to be disclosed, including Income, Asset, Liabilities, and expenses.
If the hardship payment plan gets approved, the IRS may also file a federal tax lien against you.
5. Penalty Forgiveness
The penalty that has been added for either failure to file or failure to pay may be forgiven. The penalties are added as a way to punish you for either not filing on time, not paying on time or both.
The forgiveness of penalties by the IRS is created as a way to offer you an opportunity to reward you if you have had a good filing history or if you have faced hardship or there is a reasonable explanation to the late filing or the late payment of the taxes.
If you have had a good filing history for the last 3 years, where you filed your tax return timely and generally had refunds or paid your tax balance before tax day, then you might be a candidate for the “First Time Penalty Abatement”
Another method of requesting the penalty be forgiven is if you have faced some kind of hardship that prevented you from paying the taxes.
Hardship can be one of the following:
Medical Hardship such as an unexpected illness or surgery
Financial hardship such as a loss of a job
Death of an immediate family member
The IRS also offers the forgiveness of Penalty if you received wrong tax advice from a tax professional, and because of that advice you ended up owing the balance to the IRS
One other method of getting the penalties forgiven if you received erroneous written advice from the IRS. IF this occurs, you will qualify for the forgiveness of the penalty.
6. Offer In Compromise
The IRS has a complete tax forgiveness program, known as the OIC, or Offer In Compromise. There are three types of Offer In Compromise: Doubt as to collectibility, Doubt as to liability & effective tax administration.
This program exists to give an opportunity and to wipe out the balance owed to the IRS down to nothing, zip, zero ($0).
There are requirements and eligibility guidelines to meet the standards of the OIC.
If the taxes are forgiven through the program, there is also a 5 probationary period the IRS will monitor your tax filing and no additional taxes owed. So the goal moving forward is file on time, and not owe an additional tax at tax time.
The most popular program of the OIC is the doubt as to collectibility. The guidelines are based on your disposable income, assets, liabilities and living expenses.
A sample of the IRS OIC works like this:
A calculation shows your offer amount is calculated at $100.
You owe the IRS $45,000.
The IRS accepts your offer of $100.
You pay the $100 & the IRS forgives the $45,000.
The big requirement is the eligibility guidelines and your current financial situation.
7. Non-Collectible Status - Financial Hardship Status
There is a financial hardship program known as Non-Collectible Status or CNC.
CNC is an excellent program where you are placed in a protected status because of your current financial hardship situation.
CNC is a great solution for those who will not qualify for an offer in compromise, yet can not afford to pay the taxes.
CNC allows you to continue to pay for living expenses without the worry of any type of IRS collection action.
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This is a final notice from the IRS indicating their intent to levy your property or rights to property due to overdue tax payments.
You need to take action to resolve the tax debt. If you are able to pay in full, make a prompt payment. If you are not, then the following options exist:
File a request for a Collections Due Process Hearing
Review the original tax return for errors & amend the tax return
Pay the balance in full ( & penalty forgiveness)
Temporary time to pay ( & Penalty Forgiveness) Payment Plans ( & Penalty Forgiveness)Penalty ForgivenessOffer In CompromiseNon-Collectible Status - Financial Hardship Status
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Ignoring this letter could lead to the IRS taking serious action such as garnishing wages, seizing bank accounts, or placing a lien on property.
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Yes, the IRS LT11 or Letter 1058 informs you of your right to file an appeal.
YOu make the request for a Collections Due Process Hearing (CDP) if you timely file the 12153 with the IRS.
If you do not timely file, you can still request an Equivalent Hearing.
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The IRS can levy most assets you own including physical property like your car and home, as well as money in bank accounts, wages, rental income, accounts receivables, the cash loan value of your life insurance, or commissions.
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Typically, the IRS will give you 30 days to respond before they begin proceedings to seize your property.
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There are certain types of property and assets that the IRS cannot seize, including unemployment benefits, certain annuity and pension benefits, certain service-connected disability payments, worker's compensation, salary, and other income needed for court-ordered child support payments.
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A lien is a claim used as security for the tax debt. The federal tax lien is recorded in the county where you live in, while a levy actually takes the property to pay the tax debt.
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When you cant pay the IRS because of your finances, you must make the request in writing and prove your hardship.
The Following are financially based tax relief programs:
Offer In Compromise
Currently Non Collectible Status
Hardship Payment Plan.
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In short, Yes. You would have to make a request for Tax Relief program to the IRS. Normally the IRS 433A, 433A-OIC, 433F or the 433H disclosed your finances to the IRS, where you prove to the IRS you are financially unable to the Taxes.
In addition, the correct form must be submitted to the appropriate IRS department along with Supporting Documentation, such as:
Paystubs
P&L Statements if you are self employed,
Bank Statements
Car Loan Statements
Court Orders & Proof of payments
Asset Fair Market Value, Loan Statements & Payoff Amounts
The IRS LT11 Notice or 1058 Letter is a very serious matter that requires immediate action.
If you've received this notice, it's important to file an appeal and provide evidence of your financial situation. Remember, ignoring this notice could lead to severe financial consequences, including the revocation of your passport. With these steps in mind, you can tackle the situation head-on and come up with a payment plan that suits your financial situation.
