A new one on me

[jeff501]

Hard to explain, but I’ll do my best…

My client has taken their kids to the same daycare provider the past several years. Client got a levy notice from IRS over the weekend stating they did not respond to earlier notices regarding unpaid taxes, but the information on the notice shows the daycare provider’s EIN, name, address, etc. along with my client’s address, etc. and are assessing THEM for 941 taxes for 2008 through 2010. This is the first notice my client has received. My clients do not have a business, both work and receive W2 forms and take their kids to daycare each morning.

In seventeen years I’ve never seen anything like this. The daycare provider has her own place of business and apparently has employees and she’s not paid her payroll taxes. No household tax issues here on my clients’ part, etc. Looks like the IRS has things totally messed up, has anyone had an experience like this one? Why would the people using the daycare services be getting a notice? I called my CPA friend down the street and he had never heard of such a thing either.

I tried to call the IRS person listed on the notice but got a recording, saying they were out of the office. Left a message hoping I would get a return call quickly but who knows how fast they'll contact me or thew client.

[taxea]

Call the hotline. Maybe they can give you a number that will answer. Or you can get to ACS through them if that is the division that sent the letter.

[JohnH]

Sound like a monumental error to me, but here's a thought.

Is this notice a levy on your client, or is it simply a levy for any money the client may owe the daycare provider? It sure sounds like that's what the client is looking at.

Has the client given you a copy of the notice? Almost every time I've ever had a client contact me in a panic about a levy notice they received for taxes owed by an employee or vendor, they immediately panicked and thought the IRS was billing THEM.

[jeff501]

Thanks for the replies, I appreciate them.

It looks like a levy on the day care provider but with my client's name and address on it. They were understandably concerned their bank account would be seized. I had them go to their bank today to see if anything was going on.Only way they could have gotten my client's info would be off their form 2441.

This isn't the first mistake by the IRS a client has brought to me this year. One lady received a 1099MISC for $ 311.50 for services provided at an art gallery in 2011 and just got a notice she may owe taxes on $ 31,150.00. We wrote the IRS a letter on that one.

A girl in college also brought a notice into me Saturday regarding 1099Q earnings used for school of $ 31,191.00 in 2010 when it was only $311.91. Wrote another letter to the IRS.

[ChEAr$]

Thanks for the replies, I appreciate them.

It looks like a levy on the day care provider but with my client's name and address on it. They were understandably concerned their bank account would be seized. I had them go to their bank today to see if anything was going on.Only way they could have gotten my client's info would be off their form 2441.

This isn't the first mistake by the IRS a client has brought to me this year. One lady received a 1099MISC for $ 311.50 for services provided at an art gallery in 2011 and just got a notice she may owe taxes on $ 31,150.00. We wrote the IRS a letter on that one.

A girl in college also brought a notice into me Saturday regarding 1099Q earnings used for school of $ 31,191.00 in 2010 when it was only $311.91. Wrote another letter to the IRS.

You're still missing something here. have you seen a copy of the notice?

When IRS levies in this manner, it is a levy on furture payments to a third party. IOW, you (client0 are to withhold certain percentages, maybe even 100% of future payments, i.e. also known as property at that point.

What happens in this case is usually client stops using that provider. And that provider goes out of business.

[JohnH]

Jeff:

Just to reiterate what I said and what Harlan also just told you...

You don't know what's going on until you see a copy of the notice.
Have you seen a copy of the notice, and do you understand it?

Of course they got your client's info off the 2441 - that's a normal part of the colleciton process. Your client is a customer of this provider and that's how they knew where to send the levy. Chances are a copy of the levy went to EVERYONE who filed a 2441 with that provider's info on it.

Personally, I think you had the client make a wasted trip to the bank and they are continuing to be upset over something that isn't really their problem. They need your expertise more than your guesses. You need to look at the notice.

[luke]

policy

Our policy is to NOT discuss ANY notice with client until we have a copy in hand (fax/email/in person/mail) - It is really unbelievable what clients can read/not read into a notice! I have seen this type of letter and it IS what Harlan/John both said - the daycare is getting "levied" and instead of paying the daycare - your client must send the $ to IRS!

[Mo Sheets]

Agree with other posters

I agree with the other posters. You will need to have your client give you a copy of the letter from the IRS.

When I worked for a local, private college in Indiana, we received notices from the IRS for contractors that were performing work at the college. We were basically told to send any money that was due to the contractor directly to the IRS and WE WERE NOT ALLOWED to tell/discuss the levy notice with the contractor. Obviously, if we told the contractor the money were were going to pay him was being sent to the IRS, the contractor would not show up to work.

Without seeing the levy notice, you can't give accurate guidance to your client. I just hope they are abiding by the IRS's requirements when it comes to not disclosing the levy notice to the day care provider, if that's the case.

Good luck!

[dkss]

so how do you avoid collections?

If you send the money to the IRS and can't tell the contractor (or daycare provider) about the levy, how can you avoid collections?

[JohnH]

You have to tell them when it comes time to pay - I think the problem arises if you forewarn the vendor. But it probably won't matter much in this case. Given the thin margins of most day care operators, they will likely be out of business the first or second week they find that IRS has seized their incoming funds.

I'm wondering if the best advice one could give the clients in this situation is to develop a backup plan - start looking for another day care provider. Quickly.