There is a little known, but dangerous weapon on the loose at the IRS. It's called the DETL, or Disqualified Employer Tax Levy. If you have payroll tax problems, don't get caught off guard by this IRS snare.
The IRS has serious concerns about taxpayers who continue to "pyramid" delinquent 941/940 employer payroll tax periods on top of one another. That's a legitimate concern. However, the IRS has chosen to combat pyramiding by taking away business taxpayers' due process rights to a hearing before a levy occurs in certain circumstances.
In most situations a timely request for an IRS collection due process hearing (i.e., a request within 30 days of IRS Letter 1058-Final Notice of Inent to Levy) will stop collection (including levies) until the hearing occurs, which can take months. The IRS hates it when you know this valuable procedural tool because it is technically an appeal and it re-routes that delinquent tax period away from a revenue officer, if one has been assigned to the case. The appeals officers that hold these hearings will discuss collection alternatives (installment agreements, etc) with the employer at this hearing. These pre-levy tools are not available with DETL.
Here's how DETL works. If you are an employer and have requested a due process right to a hearing on any 941 or 940 period in the last 2 years, the IRS does not have to give your business a due process hearing on a subsequent tax period before issuing a notice of levy on your bank or your accounts receivable. You become essentially "disqualified" from that pre-levy right. Disqualified employer status is deadly because you cannot stop IRS levy activity for the disqualified period. If you see a 1058-D ("D" for disqualified) letter, you know that a levy has already hit your bank or your best client.
So, how do you fight the DETL? Well, you could choose to fight the levy after the fact, but you have little to no leverage at that point. IRS revenue officers are discovering this little "gotcha" procedure. But, they are getting it wrong!
The Internal Revenue Manual says that the IRS must issue a CP 504 (standard 30 day notice of intent to levy) or Status 58 letter BEFORE they can issue the 1058-D letter. Confused yet? Well, so is the IRS on the notices that must issue before a DETL. The result is that revenue officer supervisors or the Collection Appeals department are having to release these erroneous levies if the proper pre-levy notice letters did not issue. These are short term wins for most disqualified employers because the tax problem remains.
One thing is certain. Do not ignore that scary mail from the IRS. Call a trusted local lawyer with experience with the IRS' moving targets such as the DETL. Oklahoma tax lawyer Travis Watkins can help you if you have been issued a DETL or any other scary notice from the IRS. Call Travis at 405-607-1192 before you lose valuable rights.