The Internal Revenue Service (IRS) will undoubtedly send you a letter or notice when you have unpaid taxes due. First, take a deep breath and carefully read the notice in order to understand why the IRS is contacting you and the importance of the issue at hand. Some IRS notices are sent via certified mail, such as a Notice of Intent to Levy, while other notices are mailed via regular posts, like changes to your tax return.

Each year the Internal Revenue Service (IRS) sends out millions of notices and letters to taxpayers for a multitude of reasons. Be sure not to panic, as most times you only need to respond to take care of the notice. There are many reasons why the IRS may send a letter or notice. Each notice has specific instructions about what will need to be done. If you agree with the notice, a response is not required. That is unless the notice instructs otherwise, or payment has to be made. If there’s no agreement with the notice, it’s essential that you respond immediately. We suggest you write a letter to explain your reason for disagreeing.

Include all the information and documents you believe the IRS should consider. Mail-in your reply to the address shown in the upper left-hand corner of the notice, along with the tear-off portion of the notice. There are countless reasons the IRS may be contacting you. Listed below are just a few of the most common occurrences.

An IRS Notice of Deficiency is a letter explaining the purpose of the amount of the deficiency, and the taxpayer’s options. Your IRS notice deficiency will include the following:

If the IRS determines that an employee does not have enough withholding, they will notify the employer to increase the amount of withholding tax by issuing a “lock-in” letter that specifies the maximum number of withholding allowances permitted for the employee. The employer will also receive a copy for the employee that identifies the maximum number of withholding exemptions permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding exemptions.

If the employee still works for the employer, the employer must furnish the employee copy to the employee. If the employee no longer works for the employer, NO ACTION IS REQUIRED AT THIS TIME. However, if the employee should return to work within twelve (12) months, the employer should begin withholding income tax from the employee’s wages based on the withholding rate stated in this letter. The employee will be given a period of time before the lock-in rate is effective. During this period they will submit for approval to the IRS, a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee must send the Form W-4 and statement directly to the IRS office designated on the lock-in letter.

The employer must withhold tax in accordance with the lock-in letter as of the date specified in the lock-in letter unless otherwise notified by the IRS. The employer will be required to take this action no sooner than 45 calendar days after the date of the lock-in letter. Once a lock-in rate is effective, an employer can not decrease withholding unless approved by the IRS.

An IRS Notice of Intent to Levy is a notice that the IRS sends if there are plans to seize your assets. This notice is usually only sent when there is an extreme delinquent tax problem that hasn’t tried to be resolved. Your IRS intent to levy a letter should refer to the tax period of which you owe taxes. The Internal Revenue Service must send a notice for the first time, for each tax and periods, it intends to collect by taking your property.

The IRS, under the law, must take the following steps at least 30 days before seizing your assets:

A tax levy notice is a legal seizure of your property to satisfy a tax problem. A levy actually takes the property to repay the tax issue. IRS Levy notices are put into place after three requirements are met:

These notices can be sent in person, at home, your workplace, or your last known address by certified or registered mail.

Applicants who file for Free Application for Federal Student Aid (FAFSA) and who indicate their parents won’t file a federal income tax return are required to obtain an IRS Non-Filing Letter. Additionally, if the applicants or parents of the applicant fall below the IRS filing thresholds, an IRS Non-Filing Letter will need to be filed.

A Verification of Non-Filing Letter confirms that the IRS has not received a tax return for the parents or students who have filed an IRS Non-Filing Letter. However, this letter does not indicate whether the student or parent was required to file a federal income tax return.

Once you have carefully reviewed your letter, you will then know if any action is required on your part. Ignoring the actions required can cause the IRS to continue taking the next steps. For example, demand for payment notice will eventually progress to a Notice of Intent to Levy. You can avoid this by calling the phone number provided to set up payment arrangements. It’s also important to respond within the allotted time frame stated on your notice.

Each IRS Notice is dispatched with a stipulated deadline, accentuating a timeframe within which the taxpayer is expected to respond or take necessary action. This deadline isn’t arbitrary and is impregnated with a legal underpinning that mandates adherence.

Avoiding penalties and preserving one’s appellate rights in dealings with the Internal Revenue Service (IRS) hinge significantly on the timely and apt response to any correspondence or inquiries. When it comes to the avoidance of penalties, ensuring that all communications and requisite documentation are submitted promptly not only safeguards against the risk of accruing additional financial burdens in the form of penalties but also facilitates a smoother interaction with tax authorities by showcasing compliance and cooperation. Similarly, in scenarios where disagreements with the IRS emerge, maintaining a punctual dialogue is pivotal. Timely responses are not merely procedural formalities but crucial actions that serve to preserve one’s appellate rights, ensuring that the avenue to contest and appeal decisions remains unimpeded. Thus, demonstrating diligence in communication timings is a dual-faceted strategy, minimizing punitive risks while concurrently safeguarding one’s rights to dispute resolutions and appeals in the complex labyrinth of tax regulation and bureaucracy.

Addressing the immediacy and potential severity of consequences stemming from neglecting an IRS Notice, individuals may find themselves entwined in a thorny financial predicament characterized by the accumulation of penalties and interest on any outstanding amounts due. Such financial encumbrances are not only confined to immediate monetary obligations but also ripple into a broader spectrum of financial stability and credibility. In scenarios painted by aggravated circumstances, the IRS may not hesitate to impose a lien on one’s assets or execute a levy on property to recover the owed amounts, escalating the matter to a realm punctuated by formidable legal and financial implications. Moreover, the repercussion casts a shadow not only over one’s present financial standing but perilously seeps into affecting credit scores and establishes a precarious foundation for future financial endeavors, thus positioning individuals in a potentially debilitating cycle of persistent financial and legal challenges. Consequently, the ramification of disregarding such notices transcends the mere immediacy of fiscal obligations and harbors the potency to cascade into realms impacting one’s overall economic stability and legal standing.

The implications of an IRS Notice on a credit score often unveil a complex web of financial intricacies, varying appreciably based on the ensuing actions of the taxpayer upon receipt of the notice. Direct impacts, although previously more pronounced, have been somewhat attenuated in recent years. Historically, certain tax liens – which are legal claims made by the government to secure payment of tax debt – were reported to credit bureaus, thereby directly influencing a taxpayer’s credit score. However, with the introduction of the National Consumer Assistance Plan, these direct repercussions have been considerably mitigated, offering a semblance of financial clemency by no longer factoring specific tax liens into credit score calculations.

On the flip side, there is a cascade of indirect consequences that could potentially wreak havoc on an individual’s credit score, contingent on how they navigate through their tax obligations post-IRS Notice. Unaddressed tax obligations can snowball into a formidable financial adversary, accumulating interest and penalties that might jeopardize financial stability. Furthermore, tax liens and levies, which constrict one’s financial maneuverability by legally encumbering assets or wages, add an additional layer of fiscal strain. Moreover, in particular instances where the IRS resorts to employing private collection agencies to recoup outstanding debts, the actions and reporting of these agencies could, in turn, cast a shadow on credit scores, adding to the spectrum of indirect financial repercussions rippling from the initial IRS Notice.

The IRS Fresh Start Program emerges as a structured initiative designed to facilitate an easier resolution for individuals and small businesses entwined in the complexities of tax debts.

The key components of the Fresh Start Initiative are the following:

Adhering to FBAR mandates is crucial, considering the stringent penalties associated with non-compliance or erroneous reporting.

IRS Notices, with their inherent ability to disconcert recipients, bring forth a myriad of challenges and obligations that demand immediate attention. Delineating discrepancies, pending audits, or unresolved financial obligations, these notices serve to inform taxpayers about the variances or omissions in their submitted records. The inherent rigidity of the stipulated response deadlines exacerbates the anxiety and urgency associated with them. In this maelstrom of fiscal disarray, the IRS Fresh Start Program emerges as a beacon of hope for many.

This program, sculpted to assist taxpayers in navigating the tumultuous waters of tax debts and to avoid the dire straits of enforced collections, brings with it an opportunity to reset one’s financial bearings. By facilitating more accessible and flexible payment options for individuals and businesses, the Fresh Start Program often proves instrumental in mitigating the repercussions of tax debts. Eligibility assessments and a keen understanding of the application process are indispensable in leveraging this program effectively.

In scenarios where taxpayers find themselves ensnared in the complexities invoked by IRS Notices, a concoction of proactive engagement, comprehensive assessment of the notices, and astute utilization of available resources, such as the Fresh Start Program, can potentially avert a financial debacle. Thus, skillfully marrying knowledge with strategic action, while adroitly intertwining it with the opportunities afforded by such programs, can carve out a pathway toward financial stability amidst the chaos.

Be sure to keep copies of all the letters and notices you have received from the IRS, as well as the documentation you send to the agency, just in case you need to refer to the information in the future. You can search your notice online! At Victory Tax Lawyers, LLP, we speak to the IRS every day and know exactly what your rights are. Let us be your voice and advocate. Call now at 866.640.0640.