New Format of Notice of Intent to Levy Fails to Provide Sufficient Notice

Today we welcome back guest blogger E. Martin Davidoff. Last month Marty’s post addressed the offer in compromise Form 656.  Today, he examines the notice of intent to levy form.  The way the IRS writes its forms can have a significant impact on the outcome achieved.  I wrote last fall about changes to the letters in the collection notice stream where the letters sought to bring in revenue.  Early in the life of the blog I wrote about the disconnect between the form used for the collection information statement for offers in compromise (Form 433-A(OIC)) and the Fresh Start provisions that had been adopted about 15 months earlier.  The quality of a form can make a huge different in the outcome of the matter for which the form, or form letter, is created. 

 A well written dunning notice can bring in a lot more money than a poorly written one.  Shortly after RRA 98 I drafted the first notice of intent to levy that sought to combine in one letter the statutory requirements of 6331, the basis for the traditional notice of intent to levy prior to that time, and the new requirements of the 6330 brought about by the advent of collection due process.  I remember the IRS executive overseeing the project impress upon me the importance of the way the letter was written because of its revenue impact.  The letter can also impact how many people exercise their CDP rights.  Marty questions whether the notice of intent to levy letter provides enough notice to those who may want to pursue their CDP rights.  Keith 

Section 6330 provides that “No levy may be made…unless the Secretary has notified such person in writing of their right to a hearing under this section before such levy is made.” 

            Until recently, such notice was usually accomplished by sending Letter 1058.  On LT 1058, one’s right to a hearing and the urgency of the notice was made very clear.  The first two lines of the notice read, in all caps and larger font:




Lately, however, the IRS has been moving towards LT11 Sample.  The change is shocking.  Although the notice makes it clear that there is an intent to levy along the following lines:

Notice of intent to levy

Intent to seize your property or rights to property

Amount due immediately:  $XX,XXX.XX

the right to a hearing is not disclosed until the middle of the second page, where in a much smaller font, the IRS states:

Right to request a Collection Due Process hearing

A paragraph explaining the process follows in the normal small font.

The question should come into play is the revised notice, the LT-11 sufficient notice under the Internal Revenue Code?  I suspect it is as many required notices are often buried in publications addressing a myriad of rights.  However, the change in the design of the notice appears clear to me that the IRS is intentionally downplaying Taxpayer’s right to a hearing.  And, I, even as a seasoned tax professional did not at first realize that the LT-11 was the new Letter 1058 until pointed out by my para-legal who is paid to review all the notices with a fine-toothed comb.


It is clear that the IRS now views the form LT11 as a substitute for the Letter 1058 as both are listed as essentially the same notice on the FAQ section of the IRS website: .  Interestingly, the FAQs for the LT11 (Letter 1058) does not mention at all the right to a Collection Due Process (“CDP”) hearing.  It merely states “you have the right to appeal” and provides no specific timeline for such appeal.  There is also a separate write-up on Understanding your LT11 Notice: which does clearly mention that one may wish to appeal the proposed levy action.

Section 6330 provides what the notice must contain and how it is to be delivered.  However, it does not state the manner in which the information must be displayed within the notice.  And, although the notice is technically legal, I believe it is immoral.  It also appears to violate four of the recently adopted Taxpayer Bill of Rights, at least in spirit.

The Right to be Informed provides that taxpayers “are entitled to clear explanations of the law and IRS procedures in all tax forms, instructions, publications, notices and correspondence”.  In my mind, burying one’s right to a hearing on the 2nd page of a notice is not “clear”.

The Right to Quality Service provides that taxpayers should “receive clear and understandable communications from the IRS”.  I submit that the new design of form LT11 is not clear as to what a taxpayer must do to protect his or her rights.  The second page of the LT11 may never be read as the Taxpayer is likely to panic from the threats made on the first page.

Similar analyses can be made to The Right to Challenge the IRS’s Position and Be Heard and the Right to Appeal an IRS Decision in an Independent Forum.

The Letter 1058 has changed over the years.  For example, the 2002 version had a section entitled WHAT YOU SHOULD DO.   That section of the 2002 Letter 1058 made it clear that there were multiple responses that could be made within 30 days to prevent a levy, and the Appeal through the Collection Due Process hearing was one of those possible responses.  The Letter 1058 of 2002 did this by stating that the levy may happen “Unless you take one of these actions:” and then went on to list alternatives including the CDP process.   The Letter 1058 that I observed being used in 2015 has a revision date of October, 2008.  And even though it does clearly list the option of the CDP hearing on page 1, it does not make it clear on page 1 of the notice that such request alone, without either paying or entering into a payment arrangement (the other alternatives), will prevent the levy action.   However, such is made clear on page 2 under the section What We Are Going To Do.  The LT-11 sets forth one’s right to the CDP hearing on page 2 of the notice and has no information whatsoever regarding appeal rights on page 1.

It should be noted that the 2002 version of the Letter 1058 included the following language:

“Even if you request a hearing, please note that we can still file a Notice of Federal Tax Lien at any time to protect the government’s interest.” 

This had been a very helpful disclosure that is not currently contained in either the 2008 version of the Letter 1058 being used currently nor is such disclosure being made in the LT-11.   Many taxpayers have the misconception that their filing of an appeal to a Notice of Intent to Levy enables them to have a hearing prior to a Lien Filing.   That is why the 2002 language of the Letter 1058 on liens was so helpful and should be reinstated.

Call to Action:

When a form misses the mark it provides an opportunity to call on the IRS to eliminate or revise it.  Perhaps the form LT-11 provides such an opportunity.  The appropriate notice of one’s right to a hearing as prominently displayed as the Letter 1058 is an important notice that implicates taxpayer rights and the responsibility of the IRS to inform them of those rights.


Amended Form 656 – How to Respond When the IRS Has Prepared a Substitute for Return

Today we welcome first time guest blogger E. Martin Davidoff, CPA, Esq.   I have to appreciate someone else saddled with a first name they do not use.  Martin practices in New Jersey but I associate the practice of giving male children first names they do not use more to the South where I grew up.  In an age that relies on computers, attempts to avoid using your first name are fruitless.  So, I receive a lot of correspondence for Temple.  I do not know what the E. stands for in Martin’s first name but I assume he too receives correspondence from computers addressing him with that name.   I met Martin at the recent International Taxpayer Bill of Rights conference where I learned he was a paperboy from 1964 to 1969 after I incorporated a story from my days as a paperboy (1965-1970) into my presentation.  I received enough comments from past paperboys to consider writing a post connecting it to tax procedure.

Martin writes today about a change to the form used for offers in compromise.  Responding correctly to the questions on the form is important but difficult if the form does not give you the choice you think best fits the situation.  Les posted recently about a different issue that comes up in offer cases that also puzzles practitioners as they prepare the Offer form.  He wrote about figuring out what income is income for purposes of calculating taxpayer’s ability to pay focusing on a case involving Railroad retirement benefits being included in income for offer computation purposes.  Just recently, the Tax Court in Matthews v. Commissioner issued a similar opinion related to veteran’s benefits.  These two cases make it clear that the IRS draws a distinction between the first three sections of IRC 6334 directed at exempt assets and subsequent provisions of 6334 which exempt certain income streams from levy but the IRS has not provided instructions setting out its position on the issue and giving guidance to those seeking to prepare the offer form.  The IRS uses the levy exemption from assets in calculating assets taxpayers may exempt in the offer calculation.  It ignores income streams exempt from levy in calculating a taxpayer’s ability to pay on the income side.  If you read cases, you can figure this out but you do not want to have to research case law on such a basic issue.  Guidance is needed to direct the taxpayer or the representative to the correct result.

Understanding the offer process, the calculation and the Form are important components to a successful offer.  The issue Martin discusses is especially important because of the bankruptcy holdings denying discharge to late filers.  In circuits denying discharge to those who file late (See here, here and here), offer in compromise represents perhaps the only path to getting rid of the liability.  We thank Martin for his insight on the offer form.  He invites comments from others on their experience or expertise on the issues discussed in this postKeith 

Filing Requirements Section

We all have experienced clients who had been long-time non-filers and come into our offices to do an offer in compromise (“OIC”).  They have satisfied their tax obligations by accepting IRS Substitute for Return (SFR) filings or by filing the last six to eight years of tax returns.  So, the filings are done and the Taxpayer wants to file an offer in compromise.


The 656 form revised last January posed what I had thought to be a potential problem for such clients.  A new question was added on the top of page 4 (Section 7) which simply states “Filing Requirements” and lists below two alternatives:

  1. I certify that I have filed all required tax returns; or
  2. I certify that I was not required to file a tax return for the following years: _____________.

The question is what if neither statement was true?  That is certainly the case with long-term non-filers.  Such individuals often have some unfiled returns in their past.  And, those with SFR filings have definitively not filed all required tax returns.

Yet, I know that the IRS does approve offers in compromise for those with SFR balances due.  So, what is a practitioner to do?  For these individuals, we cannot have our client check either box truthfully in such circumstances.  So, is our only alternative to not check either box and submit the form 656 with the required financial disclosure package?  Would that work?  Well, after speaking with a Senior Policy Analyst who deals with the OIC program, I learned:

  • The failure to check either box in the Filing Requirements section will NOT cause the offer to be returned or rejected; and
  • The Filing Requirements section was added to form 656 in the 2015 as a reminder to taxpayers that, generally, they need to be compliant. Such compliance at this point in time might mean: Have you filed your 2014 return? Are your 2015 tax payments paid in at the appropriate level?

So, if our client has filed the past six years returns and has unfiled returns prior to six years, we can leave the Filing Requirements section 656 blank and the IRS will process and fully evaluate my client’s offer.

A review of the IRM does not appear to contradict this conclusion.  The failure to choose either of alternatives a. or b. above does not appear in IRM (07-28-2015) when determining processibility.  Furthermore, (03-07-2014) makes clear that a return of an offer for a taxpayer who has “not remained in filing compliance” will not exceed a 6-year lookback without managerial approval.  And, prior to an offer being returned under this provision, the IRS must make a reasonable attempt to secure the delinquent filings.  Accordingly, any denial for noncompliance will not be a surprise.

Section 8 Offer Terms

Section 8 of form 656 sets for various terms and conditions regarding offers in compromise.  Essentially, this is the contractual “small print”.  Specifically, I bring your attention to the first portion of the offer terms, part a).  That language, provides, in part:

“I also authorize the IRS to amend Section 2 on page 1 by removing any tax years on which there is currently no outstanding liability.” 

In effect, the IRS can simply cross out a year and that becomes the complete contract with my Taxpayer.  And, they do not even have to give notice that they are doing so!  Well, what happens if one is submitting an offer in compromise for a year in which there has been identify theft?  The client has filed the correct return with the IRS showing a balance due.  But, the IRS computers show no outstanding tax liability.  They might cross out the year.

So, what can we do?  Can we cross out the objectionable Section 8 language?  In speaking with the Senior Policy Analyst, the answer is a definitive NO!  The “small print” cannot be changed under any circumstances.  However, if I am aware of the situation in advance, I should bring it to the attention of the IRS up front and they will help us work through the issue.  That does not solve unknown identity thefts.  The better alternative, in my opinion, is to rewrite the provision to read:

“I also authorize the IRS to amend Section 2 on page 1 by removing any tax years on which there is currently no outstanding liability, so long as I am advised of such change prior to such change becoming effective.”