Are IRS letters piling up on your cabinet? Don’t panic! First, take a deep breath, exhale, and open the envelope – don’t assume you know what it is. Not every envelope from the IRS is a bill or even bad news. Many IRS letters and notices merely specify what the IRS did with your account or what the IRS has received. But, there are other kinds of letters that require your immediate action. Otherwise, your important procedural rights are forever lost. Here are three examples of the most important IRS letters.
Final Notice of Intent to Levy
The IRS is required by law to send a notification to anyone who owes a tax debt before starting enforcement by levy or seizure. This letter is called a Final Notice of Intent to Levy, and is authorized by Internal Revenue Code section 6330.
You do not want to miss the Final Notice of Intent to Levy because it gives you 30 calendar days to file an administrative appeal with the IRS, disputing the IRS’s intent to start collecting the taxes from you. The 30 day period cannot be extended.
- First, while the appeal is pending, the IRS is prevented from taking its intended enforcement action – no levies, no seizures in most every case.
- Second, the appeal moves the case file from the IRS Collection Division to the IRS Office of Appeals. You will have an opportunity to conference with a settlement officer to negotiate a solution to the unpaid taxes.
- Third, if you cannot work it out with appeals, you have the right to dispute the proposed enforcement in the U.S. Tax Court.
The process to appeal, stop, and dispute intended IRS enforcement before it occurs is commonly referred to as a Collection Due Process Appeal.
Notice of Deficiency
The notice of deficiency will list the adjustments to your taxes proposed by the IRS– for example, disallowing your home office deduction, or business use of your car, or increasing your income from a retirement distribution that you overlooked. It gives a calculation of a new tax due, interest and penalties.
The notice of deficiency is also known as a “90-day letter” or “statutory notice of deficiency,” and is authorized under Internal Revenue Code section 6212. The notice is important because:
- It gives you 90 calendar days to file a complaint in the U.S. Tax Court to dispute the proposed changes to your tax return.
- You also have other options, including asking the IRS to reconsider your case based on deficiencies in the 90-day letter, filing an Offer in Compromise, proposing a payment plan, or agreeing with the assessment and paying the deficiency in full.
- If you do not respond to the Notice or file a petition for review in the Tax Court in 90 days, the proposed adjustment becomes final, and the IRS will send you a bill and start collection efforts.
Trust Fund Recovery Penalty – IRS Letter 1153
The IRS cannot make an assessment against business owners for unpaid employee portions of the employment taxes unless prior notice and appeal rights are first provided. An IRS Revenue Officer will issue Letter 1153 to any person with decision-making authority over the filings and payment of the employment taxes.
The assessment is called a trust fund recovery penalty because the decision-makers had a caretaking (trust) responsibility to pay the employees’ withholding and their portions of FICA taxes to the IRS. If the business owner fails to pay over those tax amounts, he or she can be personally held responsible for repayment of the taxes. This is authorized by Internal Revenue Code section 6672.
If you dispute the liability, you have a 60-day window of time to file an appeal. The appeal prevents an assessment being made against the target person, and provides independent review of the Revenue Officer’s findings.
The above three letters involve notice of “proposed” actions by the IRS before those actions can be implemented. The tax code has restrictions on the IRS acting unilaterally to finalize an audit, levy on property or conclude an investigation into personal responsibility for trust fund taxes.
To Learn More About IRS Letters, Contact an IRS Attorney Today
When dealing with the IRS, it is essential to know these rights, what they mean, and how to respond. If you or someone you know gets one of these IRS letters, seek professional help. Call Sodowsky Law Firm at (703) 968-8000.