What To Do When Your IRS Account Is in Jeopardy of Lien or Levy
Being in jeopardy of lien or levy with the IRS is a serious matter that could have a significant impact on your financial life.
As the nation’s most powerful collection agency, the IRS can turn your financial life upside down.
Here’s what you need to know about your IRS account being in jeopardy of lien or levy.
Table of Contents
What Does “In Jeopardy of Lien or Levy” Mean?
In a nutshell, being “in jeopardy of lien or levy” means that that you are in danger (“jeopardy”) of the IRS filing a notice of federal tax lien against you (“lien”) and/or the IRS seizing your assets (“levy”).
How Does One End Up in Jeopardy of Lien or Levy?
A taxpayer ends up in jeopardy of lien or levy after the following things have happened:
- The taxpayer filed a tax return — or the IRS prepared a substitute for return (SFR) — indicating a balance due.
- The taxpayer did not pay this balance due.
- The IRS sent the taxpayer several collections notices — such as the CP504 or LT11 — demanding payment or some kind of resolution for the debt.
- The taxpayer did not respond to these notices in a manner satisfactory to the IRS.
Once these things happen, the IRS decides to threaten the taxpayer with a lien or levy, and the “your account is in jeopardy of lien or levy” warning appears when the taxpayer logs into their IRS account online.
What Should I Do If I Am in Jeopardy of Lien or Levy?
If the IRS informs you that your account is in jeopardy of lien or levy, take the steps below.
Step 1: Check your IRS account for accuracy.
Don’t assume that the IRS did their math correctly — review the IRS’s numbers against your own.
Step 2: Correct any errors with the IRS.
If you do find an error in the IRS’s math, take it up with them.
You can call the IRS Automated Collection System at (800) 829-7650 to discuss your disagreement with the IRS’s numbers.
You can always reach out to us at at 866-8000-TAX to go to bat against the IRS for you.
Step 3: Seek Penalty Abatement.
For most of our clients with penalties on their account, we at least seek some sort of penalty relief for them.
Sometimes the IRS grants it; sometimes they don’t.
But it’s generally at least worth a shot.
For more information about seeking abatement for the penalties on your account, check out this article.
Step 4: Pay the Balance Due OR Seek Tax Relief
Finally, you have to figure out what to do with the amount you owe the IRS after you’ve cleared up any disagreements with them concerning the amount as well as obtained any possible penalty relief for your account.
You can, of course, pay off your balance in full. This will (obviously) stop future penalties and interest from accruing.
However, a better option — if you qualify for it — is an offer in compromise. An offer in compromise is an agreement you make with the IRS in which the IRS agrees to accept a lower amount to satisfy your tax debt than you actually owe.
That said, not all taxpayers qualify for an offer in compromise, so there are other options, such as a temporary hardship placement called currently not collectible status as well as installment agreements for taxpayers who wish to pay their balance over time.
For an overview of how tax relief works, read our article What Is Tax Relief and How Does It Work?.
Author:
Logan Allec, CPA, Founder and Owner
Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.
