Beware of Notice CP90: What to Do If You Receive It.

If you have received a Notice CP90, it is important that you act immediately. To help you through the process, this guide examines what the notice means, and what your options are.

[lwptoc numeration="decimalnested" skipHeadingText="Share This:"]

Each year, the IRS sends out millions and millions of notices and letters to taxpayers, for a variety of reasons. Each of these letters addresses issues from informing a taxpayer of their new tax credit, to reminding them to address their outstanding tax balance.

While the alphanumeric code the IRS uses to categorize and organize these notices can be intimidating, don’t worry. Most of these notices aren’t going to inform you of anything bad, and there are only really a handful of notices that the IRS sends out frequently. Among the worst ones, however, is Notice CP90.

Notice CP90 is the code for the IRS’s Notice of Intent to Levy. This means that the IRS is just a few steps away from formally claiming something you own to satisfy your debt to the government. If you receive an IRS Notice of Deficiency explained, it indicates that the agency believes you owe more taxes than you reported. This notice provides you with specific details about the adjustments being made and gives you a chance to respond before any further action is taken against your assets. Ignoring this notice can lead to additional penalties and interest on your tax liability, so it's crucial to address it promptly.

This notice never comes out of nowhere. But receiving it doesn’t automatically spell out your doom, either. You still have a few things you can do to stall the levy, address it head on, or have it released.

Understanding Notice CP90

Notice CP90 is one of the last warnings the IRS gives you before issuing a levy on your property, accounts, or even wages. To understand CP90, we need to understand what a tax levy from the IRS looks like.

A levy is a physical claim on a property or asset you own for the purpose of paying off your tax debt. If you are employed, the IRS may claim a levy on your wages via your employer. A portion of your salary will then be withheld each month to pay off your tax debt, proportionate to your number of dependents (i.e. fewer dependents, bigger levy). This is also known as wage garnishment.

If you are self-employed, it’s more likely that the IRS will claim one of your assets to liquidate for cash.

Not only does this mean that the government can claim and sell secondary properties, cars, or other assets, but it also means that the IRS won’t necessarily try and get the most value out of the asset they’ve claimed – instead, they will sell it at a calculated minimum bid price, equivalent to at least 80 percent of the seized property’s forced sale value, minus liens. It won’t keep the house on the market for months waiting for the right deal.

Levies are one of the final measures the IRS may use during its collection process to collect on outstanding tax debt and reduce the tax gap. The IRS will usually go through a number of different steps to coerce payment before resorting to a levy.

Levies vs. Liens

Levies are not to be confused with tax liens. Tax liens are a legal claim on everything you own, kind of like having the government forcibly name your possessions as collateral for your tax debt.

This doesn’t mean the IRS will come and take everything away from you, but it does greatly limit your ability to seek financing or pay off other debts, as a lien effectively pushes the government up to the top of the priority list for your debts. As with levies, you can negotiate a release on a lien. It’s all about showing a commitment to reducing your tax debt and navigating the process with professional help.

What Receiving a Notice CP90 Means

There are two elements to a Notice CP90.

The first element is that you are being informed of the IRS’s intent to levy assets in your possession to reduce the outstanding balance on your tax account. The IRS will do so 30 days after the date on the letter.

The second element is that you are being informed of your right to a Collection Due Process hearing. This second element is just as important as the first. You still have options to keep this from happening, to reduce the severity of the consequences, or to tackle the issue head on. But you must act now. You can:

- - Talk to a tax professional, an accountant, a financial advisor, or a lawyer. Discuss your situation in detail, explain where what went wrong with your taxes, gather the information and paperwork you have – including your last few returns and financial details – and talk about your options, from taking things to the Independent Office of Appeals, to discussing payment plans.
  - Consider a payment plan and installment agreement. The IRS offers taxpayers different ways to pay their debt, including lump sum payments within a few months, or monthly installments. Taxpayers with severe financial difficulties can even get a reduced total debt, or a temporary pause on any and all collection efforts.

Do you disagree with the notice? Was it sent by mistake? You can request a Collection Due Process hearing and appeal the intent to levy.

Don’t Miss Your Deadline

You have 30 days to sort things out. That is plenty of time to contact a lawyer, discuss your situation, think things through, and get in touch with the IRS.

They won’t come for everything you own and leave you out in a ditch, either – there are limitations on what the IRS can and cannot levy, and if their collection process begins to place you or your family under financial distress, you can take steps to pause the IRS’s collection process until your financial situation improves.

Note that if you miss your deadline, you will lose the right to a Collection Due Process hearing. This means you will not be able to fight the levy that way.

What Do I Do Now?

Get in touch with a professional. Call the IRS. Review your tax account. Get help filing your tax returns. Formulate a payment plan. Get advice on creating a potential offer in compromise.

Regardless of what you do next, don’t do nothing. Any action will bring you further away from a potential levy, as long as you act now. Concerned about how best to navigate the waters of tax law and Notice CP90? Get in touch with us at Rush Tax Resolution for more information.

Lien vs. Levy: What Is the Difference?

What is the difference between receiving a tax lien vs. levy and how can you resolve the issue?

[lwptoc skipHeadingLevel="h3"]

When the federal government finds that you are owing taxes and sends out a Notice of Deficiency, you have about 90 days to respond. In that time, you are encouraged to negotiate a payment plan with the IRS, or file for an extension (if applicable) to keep the IRS from continuing to apply fees, penalties, and interest on your overdue amount. Alternatively, you may challenge the notice if you find that you have indeed paid all your taxes and believe that the IRS has made an error.

If this notice is ignored, however, the IRS will turn to other methods to convince a taxpayer to pay – specifically liens and levies. These are two different tools that aim to accomplish the same thing: put pressure on the taxpayer to pay their debt.

What is a Tax Lien?

A tax lien is a legal claim by the federal government on your property. Tax liens are made public through a Notice of Federal Tax Lien, informing creditors that your assets and property are now under a lien by the IRS. This means if your property is sold or liquidated, that equity is first used to satisfy your debt with the IRS before the money goes to any other creditor, or yourself.

It does not mean that the IRS can sell your property for you or claim money from your accounts. Liens are not an actual claim on what you own – instead, they’re a declaration that the value of what you own would first be used to clear your debt before you can get a hold of it.

While tax liens are no longer noted on credit reports, they do affect your credit score, even in the long term. This can make seeking financing – for your tax debt or any other purpose – more difficult. Getting a lien cleared up as soon as possible is important, because the next step the IRS will take is a tax levy.

What is a Levy?

What is the difference between a tax lien vs. levy? Where a lien is the IRS effectively telling other creditors that it has first dibs on your property, a levy is when the IRS decides to reach in and take what it needs to satisfy your debt.

There are different types of levies, defined by what property the IRS claims to cover your tax debt. The IRS will usually only resort to a levy if you ignore their lien and make no attempt to negotiate a payment plan for your debt. Once the IRS sends out a Final Notice of Intent to Levy and Notice of Your Right to A Hearing, you have roughly 30 days before the levy itself is enacted.

Levies can typically be split into three types:

1. 1. Bank levies, where the IRS empties a bank account.
  2. Property levies, where they seize and sell a property at what they find to be a fair market value (you may appeal this valuation).
  3. Wage levies, where the IRS continuously takes a chunk of your paycheck until your debt is satisfied.

Unlike other types of wage garnishment, which are limited in scope by state laws, a federal tax wage levy isn’t affected by state laws. The amount withheld from your paycheck will depend on how many dependents you support. Unlike a federal tax lien, levies are not public, and will not affect your credit score.

- - If the IRS claims the contents of an account or sells a property and it isn’t enough to satisfy your debt, they are entitled to another levy.
  - If the proceeds from your account or property exceed your total debt, you are entitled to the remainder.

The IRS must release a levy if you enter into an installment agreement, or if you can convince them that releasing the levy will help you pay your taxes.

Withdrawing or Discharging a Lien

If you can prove that you have either already satisfied your debt with the IRS, or are up-to-date on your tax returns and payments, and have entered into a payment plan with the IRS for the rest of your tax debt, the IRS can withdraw the lien. understanding IRS tax lien notifications can significantly aid in navigating the complexities of your tax obligations. Being informed about the process will empower you to respond promptly, thereby minimizing potential negative impacts on your credit and financial standing. Additionally, recognizing how these notifications work may help you uncover options that could lead to a favorable resolution of any outstanding tax debts.

If the debt is small enough, simply getting into contact with the IRS and beginning a payment plan could be enough to ask them to withdraw the notice. This does not eliminate your debt but makes it so the IRS is no longer taking precedence over other creditors, which can help you seek financing to cover payments.

Alternatively, you can ask the IRS to discharge a lien on specific property. What this does is let the IRS continue to hold a legal claim on most of your assets and property but discharge a specific property. The IRS will usually agree to do this if you agree to use the proceeds of the sale to cover your tax debt, or if the equity of the rest of your property held in lien is equal to at least twice your total tax debt.

Lien Subordination

Another way to remove a lien, at least partially, is to seek subordination. Where a discharge aims to completely remove the IRS’s lien on a specific property, subordination lets one specified creditor take precedence over the IRS’s lien.

Usually, lien subordination is sought if you’re planning to refinance with a certain property and need a creditor to take precedence over the IRS to get access to said refinancing. The IRS will agree to subordination if you can prove that the loan will help you pay off your tax debt.

Can I Avoid a Lien or Levy?

If you have received a notice of deficiency, the only way to avoid a lien or levy is to pay off your tax debt or get in touch with the IRS and negotiate payment. If your tax debt is substantial, or if you don’t think you can pay it all off even on a monthly basis, you may want to explore alternative options such as a partial payment installment agreement (PPIA), or an offer in compromise (OIC).

How Do I Know What Is Best for Me?

Navigating the IRS and tax liens and levies can be extremely difficult. While the IRS provides many resources for taxpayers, the best way to find a solution is to work with a professional IRS tax attorney or expert. Do you need help with resolving your tax issues? Contact our team today.