What to Do When the IRS Sends a Tax Notice

Oh No! The IRS Sent a Tax Notice

The moment you take an IRS Notice from your mailbox, it’s time to open it and call an enrolled agent immediately. A tax professional will be able to guide you through the process of resolving your tax problem and place you in the best possible light in front of the IRS.

The Scary Stuff

If you don’t take action now, the IRS – which is the world’s largest and most aggressive collection agency – could cause incredible hardships down the road. You can’t bury your head in the sand once you receive the notice. Have you heard of tax liens and tax levies? The IRS uses these two methods to collect their dues. Taxpayers must fix their problems quickly and voluntarily.

Tax Liens

A tax lien is a claim on your property. If your tax debt exceeds $10,000, the IRS issues a “secret – or silent – lien” because even though at first there is no public record, it attaches to all of your property and rights to property — both real estate and personal property — as of the date the tax is assessed.

For example, a tax is assessed against you on July 1st and you give the property to a third party as a gift on July 2nd. The tax lien continues to be attached to that property, even though you had no prior knowledge of the existence of the tax lien. The person who received the property didn’t know that the tax lien had arisen!

When most taxpayers or tax professionals refer to a tax lien, they are actually referring to a “Notice of Federal Tax Lien” (NFTL). An NFTL is a document filed in a public place, such as a county recorder’s office or with the Secretary of State. It is a notice to the world that you owe taxes. A Notice of Federal Tax Lien lists the amount of the taxes owed, the type of tax, and even the years for which taxes are owed.

The Notice of Federal Tax Lien may even be picked up by the various credit reporting agencies, and may cause significant credit problems. At this point, don’t sell any property you own. Your property equity will go directly to the IRS.

Tax Levies

A levy is the IRS collecting a debt you owe through the seizure of your property; be it cash (bank) or wages (garnishment). A tax levy is not available for the general public to see. It also does not affect your credit rating by itself or prevent you from selling your property. However, if the IRS serves a tax levy on your bank, the bank is required to send all your money to the IRS up to the amount of the tax debt. The bank will then notify you of its receipt of the tax levy. After that, you’ll have 21 calendar days to negotiate with the IRS to try and convince them to release it.

If the IRS sends a tax levy to your employer, your employer is required to send the required amount to the IRS and because there is no 21-day holding period, the tax levy is effective starting with the very first paycheck you receive after the employer receives the tax levy. In addition, there is no holding period. If you find out the IRS has served a tax levy on your employer, it is extremely important to contact a qualified enrolled agent. He or she will begin immediate negotiations with your employer before your next paycheck. Your bank and your employer will forward your money to the IRS. Once that happens, it is very hard to get them back.

An Impeding Feeling of Doom

The IRS can seize assets such as wages, bank accounts, social security benefits, and retirement income. The IRS may also seize and sell your property to satisfy the tax debt. This includes your car, boat, real estate, etc. Ouch. In addition, any future federal tax refunds will be used to pay off the debt. Even state income tax refunds that you’re due may be seized and applied to your federal tax liability.
If the IRS sent a tax notice, it’s absolutely crucial that you get help from an enrolled agent. He or she will help you move forward and prevent the IRS from creating such hardships.

A Fresh Start for All

The IRS Fresh Start program makes it easier for taxpayers and even small businesses to pay back taxes and avoid tax liens. If the IRS sent a tax notice, you should know the features of and consider the Fresh Start program:

Tax Liens

The Fresh Start program increased the amount that taxpayers can owe to $10,000. The IRS generally will file a Notice of Federal Tax Lien once the taxpayer surpasses that. However, in some cases, the IRS may still file a lien notice on amounts less than $10,000.

Some taxpayers may qualify to have their lien notice withdrawn if they are paying their tax debt through a Direct Debit Installment Agreement. However, if a taxpayer defaults on the Direct Debit Installment Agreement, the IRS may file a new Notice of Federal Tax Lien and resume collection actions.

A taxpayer must meet certain requirements and pays off their tax debt. After that, the IRS may withdraw the Notice of Federal Tax Lien. Taxpayers must request this in writing, and we can help with this.

• Installment Agreements.

The Fresh Start program expanded access to streamlined installment agreements. Now, individual taxpayers who owe up to $50,000 can pay monthly direct debit payments for up to six years. They are also able to pay up to when the collection statutes expire – 10 years from the date the tax was assessed. While the IRS generally will not need a financial statement, they may need some financial information from the taxpayer. Your enrolled agent can collect and submit this for you.

Taxpayers in need of installment agreements for tax debts more than $50,000 or longer than six years still need to provide the IRS with a financial statement.

• Offers in Compromise.

An Offer in Compromise (OIC) allows taxpayers to settle their tax debt for less than the full amount. Fresh Start expanded and streamlined the OIC program. If approved, the IRS accepts a lesser amount – sometimes even just a fraction of what’s owed – to settle your debt. It isn’t always easy to gain approval (less than 40% was accepted in 2016). The IRS considers your income, assets, expenses, ability to pay, and potential hardship. However, the IRS now has more flexibility when analyzing a taxpayer’s ability to pay. This makes the offer program available to a larger group of taxpayers.

Generally, the IRS will accept an offer if it’s the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if the taxpayer can pay the amount owed in full.

Avoiding a Lien

You can avoid a federal tax lien by simply filing and paying all your taxes in full and on time. If you can’t file or pay on time, don’t ignore the letters or correspondence you get from the IRS. If the IRS sent a tax notice, Jeffrey Schneider, EA, CTRS is ready to help provide payment options that are available to help you settle your tax debt over time.

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Jeffrey Schneider, EA, CTRS, NTPI Fellow has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax Problem Solutions as well as an Enrolled Agent and a Certified Tax Resolution Specialist.
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Now What? I Got A Tax Notice From The IRS. Help! Defining and deconstructing the scary and confusing letters that land in your mailbox. Jeff defines and deconstructs the scary and confusing letters in a fashion that mixes attention to detail with humor and an intricate clarification of what is what in the world of the IRS.
The book is available in paperback and eBook on https://Amazon.com
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For more on SFS Tax Problem Solutions, visit: http://sfstaxproblemsolutions.com/
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