IRS Problems and Subsequent IRS Notices
Posted by Dean Alexander on Fri, Aug 27, 2010
Whether you have an IRS problem or not, you may get a notice from the IRS. The notice may be of no consequences such as correcting a $50 error on a tax return you have just filed. Sometimes the notices take gradual serious tones such a tax debt collection notice, a 90 day letter (no one likes this letter because it means you have to go to court to redress the harm of the 90 day letter) or now we have the punitive and ever frowning letters of Intent to Levy or a notice of Tax Levy or the ultimate nuclear notice of property seizure.
What should you do if you get an IRS notice?
The IRS publishes frequent tips about different subjects. On IRS notices here is what the IRS suggests:
1) The first thing they tell is don’t panic; yet these are the IRS words.
2) The notice will tell you about a specific issue such as correcting an amount. If you agree with the correction then ignore the notice and that will be the end of the story. If you disagree with the corrections then you must take actions. You may write the IRS at the address specified in the letter or you may call them if you think you need some urgency.
Under this category we may add CP 2000.
This form (CP 2000) is a form of income underreporting. You may have forgotten to enter a W-2 or a 1099 on your tax return. If you agree, just sign the CP 2000 and send it to the IRS. If you disagree, say so and you may be able to provide an evidence of the basis of the disagreement.
2) If you receive a serious notice of intent to levy, you must act quickly, otherwise they will either do a bank levy or wage garnishment or even levy of your accounts receivable with some embarrassing consequences with those who you do business with you. Usually a bank levy or garnishment is a statement by the IRS to come and do something about your delinquency. You need to file all your returns and then negotiate an IRS settlement.
3) Sometimes the notice ask you to file a missing return. Your response will be just to do that. File the late unfiled returns. If you don’t, the IRS may ultimately file a substitute for return for you with the adverse consequences. Every time the IRS files a substitute for return for you (SFR) you can bet that you are worse off. They will enter only the income without regards to any deductions that you may have. Additionally, you will be categorized as married filing separate which is the worst tax category you can be in.
So do not trash IRS notices. Respond yourself or have your CPA, tax attorney or your enrolled agent respond to them. Take action. Seek IRS tax help. You may be eligible for an Offer in compromise, Installment Agreement or Currently-Not-Collectible Status. Get tax relief and peace of mind. For more information on this subject see publication 594 (The IRS Collection Process).