If you’ve received Form LT11/IRS Letter 1058, or final notice of intent to levy, from the Internal Revenue Service it’s time to act. While every letter from the IRS is important, this is one you truly can’t afford to procrastinate on. If you fail to resolve the tax issue that prompted the letter, the IRS will begin collections activity.
What is Letter 1058/LT11 Notice?
The IRS expects business owners to pay taxes on their earnings. If you fail to file your income taxes, the IRS will start the notification process making you aware of the oversight and asking you for your tax payment in accordance with current tax law.
Letter 1058 is not the first notice of a federal tax lien you’ll receive if you overlooked your taxes for several years. Instead, it is the last letter the IRS will send as a warning before it acts to collect the money you owe in a different way.
Before the IRS sends you Letter 1058, you will receive a series of other notices calling your tax debt to your attention.
- First, you’ll receive CP501 which notifies you you have a balance due.
- Then, if you haven’t settled your tax balance with the IRS, you’ll receive a second reminder about your taxes through CP502 and a third reminder with CP503.
- If you’ve still not started working with the IRS to resolve the back taxes, you’ll receive CP504, which is a notice that the IRS intends to levy your state tax refund or levy other property.
Finally, if your tax bill is still unresolved, the IRS will send you Letter 1058 or Form LT11 (Form LT11 is essentially a shorter version of Letter 1058) notifying you that you are receiving your final warning before IRS collections action begins. The IRS collection action includes:
- Filing a notice of a federal tax lien on your assets or assets you’ll have in the future.
- Levying your bank accounts or your income for the amount owed.
Since this notification is very serious, the IRS will have Letter 1058 delivered via certified mail. When you receive it, the IRS knows you have it, so it’s time to resolve the issue.
What should you do if you receive one of these letters?
Your priority when you receive Form LT11/IRS Letter 1058 is to get in touch with the IRS. You may choose to consult with a tax attorney or tax professional before contacting the IRS. Many tax professionals offer free consultations. The letter will notify you that you have thirty days to respond before action is taken and it will provide the best way to contact the IRS about your back taxes.
If you fail to act, the IRS will take its money through a levy on your salary, bank accounts, personal or business property, real estate holdings, any tax refunds, or through other forms of income including Social Security benefits. If you owe more than $50,000, the IRS may even revoke your passport. Even if you can’t pay your tax bill, it’s far better to communicate with the IRS about your options than just let them take their money however they choose. As long as you’re working with the agency to resolve the debt, you still have options, including those below.
You can pay the full balance.
If you have the means to pay the tax bill, simply follow the instructions that will be on the letter and settle the debt with a tax payment. You might arrange funds with a small business loan if you don’t have them in your bank account.
If you didn’t file your income tax return, the IRS has likely filed one on your behalf and calculated what they think you owe based on the information they do have. In most cases, this amount is higher than what you would owe if you filed your own tax return and took advantage of tax credits and deductions. If you agree with the amount the IRS says you owe, however, pay it and you’ll be back in good standing.
You can file an appeal.
If you don’t agree with the amount the IRS says you owe, you can appeal. IRS Form 12153 is a request for a collection due process or equivalent hearing. Letter 1058 will include specifics on how to file an appeal and your options. Your appeal might include an offer in compromise if the IRS is agreeable.
Working with bookkeepers and tax experts like enrolled agents can help you better understand your numbers and your options when it comes to appealing an IRS tax bill. Bench works with countless small business owners who are years behind on their taxes but are working to get caught up. We can help you do the same.
You can request a payment arrangement.
If you can’t pay your tax bill in full, the IRS offers taxpayers the option to pay their tax bill in installments rather than all at once. An installment agreement might make it easier to handle your past and possibly future tax obligations.
Before you can decide the best way to handle your tax bill, you need to know your own numbers. Thankfully, even when you receive a final notice of your tax liability via Letter 1058, you have thirty days to crunch the numbers, consult a tax pro, gather information, and still respond to the IRS about your next steps in resolving your back taxes.
Timely bookkeeping is critically important for running a small business and staying current with the IRS. Bench can help you sort through your older records with our catch up bookkeeping service and work with you to help your books stay up to date so you can avoid late tax payments and subsequent penalties in the future. We learn your business quickly, so we can manage your bookkeeping with minimal input from you.
Learn more about how Bench works.
Any IRS notice can rattle a small business owner. Mistakes happen and sometimes life just gets in the way of your best intentions when it comes to the responsibilities of bookkeeping and filing taxes.
If you’ve been receiving notices from the IRS up to and including Letter 1058, you’re racing the clock to gather legal advice and find a solution to your tax problems with the IRS before it acts on its own. You still have options to protect yourself from a government lien or levy, but only if you contact the IRS about possible solutions that still leave you in control of your business and its finances.
