If you’ve received an LT11 notice from the IRS, it’s a serious call to action. This notice means the IRS is preparing to take collections measures against you—steps that could include levies, liens, or wage garnishments. Ignoring this notice could quickly lead to major financial setbacks, impacting your income, assets, and even your credit. But you do have options.

IRS Collection Actions Explained

The IRS has a range of tools it can use to collect unpaid taxes, each carrying different implications.

Here are the most common collection actions:

1. Liens on Property: An IRS lien is a legal claim against your property, including real estate, vehicles, and financial accounts, to secure the tax debt you owe. When a lien is filed, it attaches to your assets, giving the IRS a right to collect the proceeds if you sell or refinance them. Beyond complicating your ability to access credit, a lien can remain on your record even after the debt is paid, often lowering your credit score and making it harder to move forward financially.
2. Levies and Asset Seizures: Unlike a lien, a levy actually takes your property. A levy is the IRS’s authority to seize bank accounts, garnish wages, or even take other assets like cars and real estate to satisfy the debt. When the IRS issues a levy notice, your bank or employer must comply, and funds or assets are transferred to the IRS until your tax debt is covered. Levies on financial accounts can leave you with limited access to cash, creating additional challenges in covering essential expenses like rent, utilities, and everyday living costs.
3. Wage Garnishments: Wage garnishment allows the IRS to collect a portion of your paycheck directly from your employer, bypassing your control over your earnings. When this happens, a significant part of your income may be redirected to the IRS, making it difficult to meet your financial obligations. Wage garnishment not only disrupts your budget but can also put added stress on your family and household.
4. Seizing Physical Assets: In rare, but severe cases, the IRS may seize personal or business property to cover outstanding taxes. This can include cars, homes, and other valuable assets. Losing essential assets like a vehicle or business equipment can be particularly devastating, impacting your ability to earn a living or manage daily tasks. The IRS doesn’t take asset seizure lightly, but it’s a possibility if all other efforts to collect have been unsuccessful.

 The Personal Impact of IRS Collections

These collection actions have real-life consequences that can ripple through your finances, affecting everything from your credit to your basic living standards.

Here’s how:

• Impact on Credit: Liens and levies are public records and can appear on your credit report, damaging your credit score and your ability to secure loans or mortgages. A lower credit score makes it challenging to access favorable credit terms or even qualify for housing and certain jobs.
• Reduced Income: Wage garnishments cut directly into your paycheck, often taking a sizable portion that leaves you with limited funds for necessities. This disruption in cash flow can lead to overdue bills, late fees, and even eviction if you fall behind on rent or mortgage payments.
• Loss of Assets: If the IRS seizes your car, home, or other significant assets, you may face considerable lifestyle disruptions. This can make it harder to commute, impact your family’s housing situation, or strain relationships if the collections action spills over into your daily life.

Steps You can Take to Stop or Resolve IRS Collections

1. Pay the Balance: The IRS’s preferred solution is simple: pay the outstanding balance in full. However, if covering the full amount at once isn’t feasible, there are payment plans available. The IRS offers several installment options, allowing you to pay down the debt. This approach not only stops further collection actions but can also help you avoid additional interest and penalties that accrue on unpaid taxes. The process to set up an installment plan is straightforward, and with an approved plan, the IRS will pause collection actions as long as you stick to the payment schedule.
2. Request a Collection Due Process (CDP) Hearing: If immediate payment isn’t an option, you can request a Collection Due Process (CDP) hearing. This request temporarily halts collection efforts, giving you time to discuss the tax debt and possible solutions with the IRS. During a CDP hearing, you can review options to pay the debt, dispute the amount if you believe it’s incorrect, or propose alternatives like an installment plan. The hearing also allows you to bring up any challenges you’ve faced in managing your tax debt, giving the IRS a better understanding of your circumstances. A timely request for a CDP hearing not only pauses collection actions but also allows you to negotiate a workable solution.
3. Submit an Offer in Compromise: An Offer in Compromise (OIC) is an option if you’re experiencing significant financial hardship and can’t realistically pay the full tax debt. With an OIC, you propose to settle your tax debt for a lower amount, often based on your current income, expenses, and overall ability to pay. While the IRS only approves offers that align with their guidelines, an OIC can be a lifeline if you qualify, as it can clear your tax burden and stop collections. Keep in mind, though, that an Offer in Compromise involves a thorough review of your financial situation, so it’s important to ensure your application is complete and accurate.
4. Seeking Currently Not Collectible (CNC) Status: For those facing immediate financial hardship, Currently Not Collectible (CNC) status may offer temporary relief. If the IRS determines that you don’t have the resources to pay your tax debt without compromising basic living expenses, they may classify your account as CNC. This status pauses collection actions until your financial situation improves. While interest and penalties may continue to accrue, CNC status provides breathing room and protects your assets from immediate seizure. If your circumstances change, you can revisit your options and work toward a resolution with the IRS when you’re financially ready.

Take Action Now for a Better Resolution

Ignoring IRS collections can lead to serious financial consequences—loss of income, seized assets, and lasting damage to your credit. The sooner you take action, the better chance you have at finding a resolution that protects your finances.

Navigating IRS collections can be complex, but you don’t have to do it alone. Reaching out to a tax attorney or a trusted professional can make a significant difference, helping you explore your options, avoid costly missteps, and work toward a solution that fits your unique situation.