If you have received a letter from the IRS, you may feel frightened and intimidated. An IRS notice can certainly strike fear into the hearts of taxpayers. Many people believe the common misconception that the IRS is “out to get them.” In truth, the IRS is more than willing to help you settle your tax debt, so long as you act quickly and appropriately. You may not be able to get away with not paying your taxes, but you will find that paying them becomes significantly easier when you can negotiate a plan that benefits you both.
If you do receive a letter from the IRS, it will likely be one of three letters—a Notice of Deficiency, a Final Notice of Intent to Levy, or a Trust Fund Recovery Penalty. When you open one of these letters in the mail, it is important you act immediately to avoid any penalties or fees that can hurt your finances in the future. During this time, it is worth it to hire a tax expert who has proven experience in tax law and working with the IRS. A tax professional such as an enrolled agent or certified public accountant has unlimited rights to represent you before the IRS and can help you navigate the following notices.
Final Notice of Intent to Levy
If you have years of unfilled tax returns, you may owe more in taxes than you realize. A Final Notice of Intent to Levy letter does not simply come out of the blue. It is instead a reaction by the IRS after several letters have been sent notifying you that you should act. Remember that the IRS wants to work with you to pay your taxes, so don’t let it get this far.
Once you receive the Notice of Intent to Levy, you have 30 days from the day the letter was sent before the IRS begins to seize assets, including wages, real estate commissions, and other income. They can also take money from your bank accounts, business assets, personal assets such as your car and home, and social security benefits. You want to avoid this action at all costs.
If you decide to appeal, the IRS will not enforce any action until the appeal is accepted or rejected. If you or your taxpayer representative is accepted to the Office of Appeals, you will be able to work with an appeals officer to negotiate a solution, such as payment installments, or the permission to pay less than you owe.
Notice of Deficiency
What is a notice of deficiency? It is the final notice that is sent to you that warns you to take action by making any necessary changes to your tax return. Generally, you will only receive this notification at the conclusion of an audit. However, you may also receive this letter if you have not filed a tax return. The letter will list the changes the IRS intends to make on your taxes, which may include changing your proposed small business deductions, home office deductions, or any overlooked errors that the IRS proposes to correct. It will then state the new tax due, which includes any interest and penalties.
In this case, you have the opportunity to file a complaint to a Tax Court within 90 days of receiving the letter, otherwise the change becomes final and you will receive a bill. As stated before, act immediately to prevent the financial burden.
Trust Fund Recovery Penalty
The Trust Fund Recovery Penalty is dispatched when the IRS intends to take authority over the payment of the employee withholding should a business owner fail to pay employee withholding taxes. Why is it called a Trust Fund Recovery Penalty? This is because those who made a trust had the responsibility to pay the withholding to the IRS.
If you are the proprietor of a business and you are held responsible, you will need to contact the IRS within sixty days after the date posted on the letter. If you seek to appeal, the appeal prevents an assessment from being made against you or the person within your business who has been held responsible. You will then be granted an independent review regarding the findings by the Revenue Officer.
No one wants to receive a notice from the IRS, but being proactive can save you a world of hurt and monetary consequences. Keep these tips in mind if you receive some unsavory mail from the government agency and work towards a solution quickly.