What Should an IT Services Company Do if They Receive a Notice of Intent to Levy?

When the IRS Comes Knocking

Few phrases strike fear into the heart of a business owner quite like “Notice of Intent to Levy.” For IT services companies—whose operations depend on technology, skilled personnel, and continuous cash flow—this kind of notice can feel like a digital doomsday. But take a breath. You’re not alone, and you’re not out of options.

A Notice of Intent to Levy (IRS Letter 1058 or LT11) is a serious legal step in the IRS collection process. It indicates that the government plans to seize your property—including bank accounts, receivables, and other business assets—if you don’t resolve a tax debt. But the good news is, this notice also signals an opportunity. It gives you time to respond, act strategically, and potentially avoid disaster.

This article will walk IT service providers through everything they need to know about responding to a Notice of Intent to Levy, including the legal significance of the notice, immediate actions to take, long-term strategies, and how to protect your company’s future.

---

Understanding the Notice of Intent to Levy

The IRS doesn’t just levy assets out of the blue. A levy is a last resort. Before they get there, they must go through a legal process.

What is a Levy?

A levy is the legal seizure of your property to satisfy a tax debt. According to the IRS, they can take money from your bank accounts, garnish wages, seize accounts receivable, and even take physical assets like vehicles or office equipment.

What is a Notice of Intent to Levy?

This formal notice, usually titled Letter 1058 or LT11, is issued after:

1. The IRS has assessed a tax debt.

2. They’ve sent at least one notice requesting payment.

3. You’ve ignored or failed to respond.

4. The IRS has determined that collection action must escalate.

The notice gives you 30 days to resolve the issue before the IRS can move forward with the levy.

---

What an IT Services Company Should Do Immediately

Time is your most precious asset after receiving a Notice of Intent to Levy. Here’s a step-by-step breakdown of what to do within the 30-day window.

---

1. Don’t Ignore It

First and foremost—do not ignore the notice. Too many IT firms focus on technical problems while neglecting financial ones. Letting the deadline lapse will almost guarantee the IRS moves forward with the levy.

“This is a legally enforceable action. The clock starts ticking the day you receive the notice.” — IRS.gov

---

2. Call a Tax Professional Immediately

Don’t try to “figure it out later.” IT professionals understand the importance of specialized knowledge, and this is where tax professionals shine.

Hire a CPA, Enrolled Agent, or Tax Attorney who has experience dealing with IRS collections. They will help you:

• Interpret the amount due

• Confirm the timeline

• Initiate contact with the IRS

• Negotiate on your behalf

Pro tip: Some tax professionals offer emergency consultations for IRS levy notices. Look for credentials from the National Association of Enrolled Agents or the American Society of Tax Problem Solvers.

---

3. Gather Financial Records and IRS Correspondence

You’ll need:

• Previous tax returns

• Payroll records

• Accounts payable/receivable

• Previous IRS notices

• Any proof of payments already made

These will be used to verify the IRS’s claim and potentially dispute inaccurate assessments.

---

4. Contact the IRS (with Help)

If you’ve engaged a tax professional, they’ll likely file a Power of Attorney (Form 2848) and contact the IRS for you. However, if you’re contacting them yourself, be ready with:

• Your EIN or SSN

• Notice number

• Tax year(s) in question

• Explanation of financial hardship (if applicable)

Stay calm and courteous. IRS agents are trained to help, but they are bound by strict rules.

---

5. Consider Filing a Collection Due Process (CDP) Hearing Request

This is a big one.

If you believe the levy is unjust, or you need more time to resolve the debt, you can file Form 12153 to request a Collection Due Process hearing. This stops the levy from moving forward while the hearing is pending.

The deadline to file is 30 days from the date of the notice.

Learn more about Collection Due Process hearings directly from the IRS.

---

Available IRS Resolution Options for IT Companies

Whether your IT company is a one-man shop or a firm with 100+ developers, there are various ways to resolve the tax debt before a levy hits. These include:

---

1. Installment Agreement (IA)

This is the most common resolution. You pay off the debt over time through monthly installments.

Good for:

• Companies with consistent cash flow

• IT firms with long-term client contracts

Learn more: IRS Installment Agreement

---

2. Offer in Compromise (OIC)

An OIC lets you settle your tax debt for less than you owe, if paying in full would cause financial hardship.

Not everyone qualifies, but it’s an option worth exploring if your company is struggling due to downturns, loss of clients, or economic volatility.

Use the IRS Offer in Compromise Pre-Qualifier Tool to see if you may be eligible.

---

3. Currently Not Collectible (CNC)

If your business cannot afford to pay anything due to extreme hardship, the IRS may declare your account CNC. This stops all collection efforts, including levies, though interest continues to accrue.

---

4. Payroll Tax Prioritization

If the levy threat involves unpaid payroll taxes, act fast. The IRS considers this a high-priority debt and may pursue Trust Fund Recovery Penalties against you personally.

A payroll tax debt requires urgent, professional guidance.

---

Specific Challenges for IT Companies Under IRS Pressure

The IT industry faces some unique circumstances when it comes to resolving tax issues. Here’s what makes an IRS levy extra dangerous for tech companies:

---

Cash Flow Disruption Can Cripple Operations

Even a minor freeze on your accounts can stop:

• Employee payroll

• Software subscription renewals

• Cloud service payments

• Licensing fees

• Domain renewals

Losing access to these services can literally shut down your operations overnight.

---

Contractor and Client Confidence at Risk

IRS action can shake confidence among clients, investors, and partners—especially if word gets out. An ongoing IRS levy can look like financial instability or mismanagement, even if it’s temporary.

Maintain open communication with key partners and reassure them that you are actively resolving the issue.

---

Risk of Losing Top Tech Talent

The IT talent pool is competitive. If your engineers or developers sense financial trouble—especially if payroll is disrupted—they may jump ship quickly. That could create a cascading talent crisis, impacting client deliverables and contracts.

---

Proactive Measures: Preventing Future Notices

Getting a levy notice once is bad. Getting it twice? Catastrophic. Here’s how to make sure it never happens again.

---

Work With a Dedicated Bookkeeping and Tax Partner

Many IT companies are so focused on client work that they treat taxes as an afterthought. Don’t fall into this trap. Hire or outsource to professionals who monitor:

• Estimated tax payments

• Payroll tax filings

• Year-end reports

• Audit flags

---

Conduct Regular Financial Health Checks

Every quarter, run a comprehensive review:

• Are you up to date on tax filings?

• Do you have reserve funds for quarterly taxes?

• Are any IRS notices piling up unopened?

Add it to your SOPs. Treat taxes like you treat cybersecurity—non-negotiable.

---

Secure a Line of Credit for Emergencies

An emergency business line of credit or a rainy-day fund can be a lifesaver when tax surprises hit. Don’t wait until you need it—set it up in advance.

---

Assign a “Compliance Officer” Role

Even if you’re a team of 10, designate someone (or a team) responsible for financial compliance. This isn’t about micromanagement—it’s about making tax and financial accountability part of your tech culture.

---

Conclusion: Transform Crisis Into Control

Receiving a Notice of Intent to Levy is a wake-up call—but it doesn’t have to be the end of the road. IT services companies are built on problem-solving, innovation, and adaptability—skills that translate well to resolving IRS issues.

Take immediate action.
Engage tax professionals.
Explore IRS resolution options.
Make prevention part of your operational DNA.

Remember, the IRS doesn’t want to shut you down—they want to collect what’s owed. And with the right response, you can protect your company, your team, and your reputation while setting up stronger systems for the future.

---

Need help now? Visit the IRS Taxpayer Advocate Service if you’re facing undue hardship and need fast, free assistance.

---

Have questions about tax compliance for your tech company? Share them in the comments or reach out to a licensed tax professional today! Your business—and your peace of mind—deserve it.

The post 💥What Should an IT Services Company Do If They Receive a Notice of Intent to Levy? first appeared on Three Days in August IT News.

Source: https://threedaysinaugust.com/notice-of-intent-to-levy-for-it-services-company/