The IRS Final Notice

The IRS Final Notice

Last week I wrote about “IRS Collection Letters” (CP 501,503 and 504) that become increasingly threatening as time goes on and your tax debt remains unpaid.

You can also link to my first blog, the IRS Collection Process which is an overview of what you are in for if you owe the IRS back taxes.

After the 501/503/504, the next letter you get is the scariest. It’s known as the “Final IRS Notice” (before they start cleaning out your bank account).

The “Final IRS Notice” comes in two (2) different numbers, Letter 11 from the “Automated Collection Services” division, or Letter 1058 from “IRS Field Collections”.

The first thing you should do after receiving one of these letters is to contact a tax professional.

 

Next, read page 2 of the letter which talks to your right to a “Collection Due Process” hearing. You can request this hearing by completing Form 12153 which is enclosed with the Letter 11 or 1058 and sending it back to the IRS within 30 days or the original “notice date”.  

This request accomplishes four things:

  • Collection activity is suspended
  • Your case moves from Collections to Appeals
  • You buy thirty days to work with a tax professional to get unfiled returns completed and explore options to pay the IRS
  • If you disagree with the Appeals ruling, you may take your case to U.S. Tax Court

If you miss the thirty day window for the CDP hearing, check the box in item 7 of page 2 of Form 12153 requesting an “Equivalent Hearing”. You have up to one year from “notice date” to request this.

Two downsides of the “Equivalent Hearing” process versus the CDP hearing:

  • With the “Equivalent Hearing”, collection actions continue
  • You can’t appeal an “Equivalent Hearing” decision to U.S. Tax Court.

 

If your situation sounds anything like this, please call me so I can help.

Collection Letters – What to do

Collection Letters – What to do

Last week I wrote about the “IRS Collection Process” and the steps taxpayers need to take in order resolve their tax debts along with some alternatives that are available to them.

This week I am going to take a step back and go into detail on some of the compliance and collection letters that taxpayers who have unfiled returns or balances due the IRS receive.

 

If you haven’t filed a tax return in a while, the first letter you may receive is a CP516, also known as a “Notice of Missing Return”. The IRS is letting you know that they are receiving tax documents from third parties like banks, your employer, mortgage lender, etc. but haven’t received a tax return from you yet. You should file your returns immediately. You don’t want the IRS filing your return for you. It’s called an SFR or “Substitute for Return” and it’s not good for you, but that’s another article.

Once your tax return is filed and you have a balance due, you may receive a CP-501 letter. This is a “billing notice”, where the IRS is saying, “Thanks, we got the return, now please send us the money you owe right away”.

If you ignore this letter, the next one, the CP-503, or “reminder notice” is less friendly. The opening line in this letter is, “As we notified you before…” Clearly, they are becoming impatient.

If you put the CP-503 in the circular file, the next one that comes should really get your attention. It’s the CP-504, also known as the “threat to levy”. The IRS isn’t playing around now. They are coming for your money.

If you haven’t contacted your tax professional yet, the next letter, called “Letter 11”, should get you to reach for the phone. It’s called the “Final Notice of Intent to Levy and Taxpayer’s Right to a Hearing”.

If you request a hearing, it will buy you 30 days to get your tax returns prepared and filed and work out a payment plan with the IRS.

Ignore this letter and your bank account gets cleaned out, the IRS files a “Notice of Federal Tax Lien” which destroys your credit rating and you’ve missed your chance to work with the Appeals Unit or go to Tax Court.

If your situation sounds anything like this, please call me so I can help.

How does the IRS Collection Process work? – Norwalk CT

How does the IRS Collection Process work? – Norwalk CT

What do you do after you receive your first collection notice from the IRS?

Sit down, take a deep breath and call a tax professional. My practice handles collections cases all the time and I can help you.

It helps to know how the IRS Collection Process works. Here’s a brief overview:

  • Once a tax return is filed and processed by the IRS, the tax is assessed
  • Then a collection letter is sent asking for payment
  • If payment is not received right away a “silent lien” is issued and the collection letters become more aggressive
  • If you owe more than $10,000 and still haven’t paid, the IRS will file a “Notice of Federal Tax Lien” which destroys your credit rating
  • If you continue to ignore them, then they begin “levying” your assets. A levy is an actual “taking”, like cleaning out your bank account or having your employer garnish your wages

How do you make this nightmare go away?

In three words; compliance, communication and resolution.

  1. Compliance means getting current on filing your tax returns.
  2. Communication means reaching out to the IRS to let them know you want to clean this up. As an Enrolled Agent (EA) I am admitted to practice before the IRS on behalf of clients on all tax matters.
  3. Resolution means getting on a workable installment payment plan to pay off your balance due.

If you have any questions, or need help, call me at 203-434-5626 or email me at mikeo24@bythebooktaxes.net