IRS SENDS A LETTER? – Remove It From Mailbox and Read – It’s Probably Important

The IRS sends a letter.  Actually  thousands of them each day.  Most of them have a number associated that tells everyone what theAntique_Mailbox-thumb-375x341-49286 letter says without having to read it.

If you get one if these letters…read it anyway. These letters aren’t love letters. The dates and instructions contained in these letters means something i.e. they have legal significance. They aren’t being sent to make you feel warm and fuzzy.

To help you recognize these letters, I am providing a list of the most commonly issued related to the examination of a tax return or changes made to a tax return.

Letter 525 – 30 Day Letter

When the IRS is done auditing you or making adjustments to your tax return in any way, it will issue a 30-day letter. This letter is commonly known as the “525” letter.

It typically comes with a few things: a computation of the proposed adjustments to the return and instructions about what to do if you don’t agree with the proposed adjustments.

If you don’t agree with the adjustment, which is often the case, you can send in a request for appeal or protest to the office or person that sent the letter to you in the first place. There should be, as stated, something with the letter that tells you how to do this. This appeal has to be filed within 30 days from the date of the letter not the date you received it.

Letter 531 – Deficiency Letter

This is the biggie. The so-called “90 day” letter. This letter is informing you that the debt is now determined and that you can file a Tax Court Petition to challenge it. The letter typically explains in general terms how to do this if you don’t agree with the determination. In order to challenge the adjustment in Tax Court you must file a petition with the Tax Court within 90 days of the date of the Notice. No Exceptions, No do-overs.

Letter 692 – Consideration of Additional Findings

When the IRS issues a report to you with a calculation of the proposed adjustments it wants to make to your tax return, it usually tells you what to do if you don’t agree. This letter is different. It tells you what to do if you do agree with the adjustment. Sign and Return.

There are situations where this makes sense. Once in particular is when the IRS is creating are return for a delinquent filer. It will make sense sometimes for the delinquent filer to agree to the proposed adjustment…Talk to your Attorney about this.

If you don’t agree, you must file an appeal or protest within 15 days from the date of this letter to be able to discuss the adjustment further with appeals.

Letter 1153 – The Trust Fund Recovery Letter

When a business that is a separate entity doesn’t pay it’s payroll taxes, the IRS can assess a penalty for the amount of the employee’s portion that was withheld from their check against the “responsible parties”. Typically in small business situation the owners and anyone else with decision making authority.

This letter will lie out the assessment and tell you that if you agree with it you should sign and return. If you don’t agree than you have to appeal or protest within 60 days for the date this letter 1153 was dated. When appeals disagrees with you, than you will receive a 90 day letter giving you the ability to petition the Tax Court. See above.

Letter 1389 – Tax Shelter

If you have a tax shelter and the IRS disagrees with the way it is being used, it will issue this letter to you and tell you about what it will do if you don’t capitulate. If you agree, you can sign and send. If you don’t agree you can protest within 30 days from the date of the letter. There should be a set of instructions with the Letter.

Letter 3391 – Non-filer letter

I see this one all the time. It is the letter the IRS hands out like candy to those who haven’t filed a tax return. It tells the delinquent filer the amount the IRS thinks that he or she owes for particular missing tax periods and tells the taxpayer to sign if they agree and to appeal/protest if they don’t within 30 days. A 90-day letter will issue when nothing is sent, or when the appeal is complete and the IRS still thinks it is right.
Letter 3727 – Earned Income Credit

This letter tells you why you won’t receive your earned income credit at all. Again, you can sign and return or appeal within 30 days of the letter.

Letter 3728 – Earned Income Credit

A common IRS letter that delivers the bad news that you are being given only a portion of the earned income credit, not the entire amount and why. If you agree with the adjustment you sign and send in if you don’t, you can file a protest within 30 days.

Letter 3016 – Innocent Spouse

Apply for Innocent Spouse Relief and get rejected? This is the letter you should initially receive giving you the ability to agree or to appeal within 30 days from the date of the letter and have the appeals officer review the determination.

IRS Adjusted Your Return? – You may only have 90 days to challenge it

Our Mesa Tax Lawyer Can Help You When The IRS Adjusts Your ReturnIRS adjusted your return? If so, 90 is an important number. It is the time frame i.e. the number of days the law thinks you should be given to respond to an IRS Notice of Deficiency.

The IRS Notice of Deficiency is issued as a result of the IRS making an adjustment to your return that you either didn’t respond to or didn’t agree with. It is the invitation to the taxpayer to take it up with the US Tax Court and see what it has to say about the adjustment.

The required legal method to do this is the filing of a Tax Court Petition.

90 days. That seems like a long time. Three months to get a Tax Court Petition figured out and filed correctly. When the 90th day arrives though, many taxpayers are surprised by how quickly the time passed and the petition is filed late.

If the Tax Court Petition isn’t filed timely, the taxpayer receives a bill for the total amount of the debt including the adjustment and the “fun” begins. This is the type of fun that you want to avoid.

Here are some important things to understand about this 90-day letter.

1. The 90-day period is final. There is not ability to extend it. If you don’t file the Tax Court Petition on time, your right to appeal the adjustment to Tax Court will be lost…forever and a day.

2. If you file the Petition timely, it doesn’t go straight to the Judge. It goes first to the Appeals office and they will call you to try to work something out. Probably what you were trying to do, when you filed the Petition in the first place.

3. Some people file Tax Court Petitions without the aid of an attorney. Actually, a lot of people do. You can go to the Tax Court’s Website at www.ustaxcourt.gov to find procedures and get access to some forms.

4. If you missed the appeal date and you have no Tax Court in your future you may want to think about:

a. Filing an Audit Reconsideration Request. Publication 3598 tells you all about it. A few things about audit reconsiderations. You must supply information that the IRS has never seen before and you don’t have the ability to appeal its decision.

b. File an offer in compromise based on a doubt as to a liability. Yes another bite at the apple.

c. You can also just bite bullet, pay the tax and file a claim for a refund of the tax paid or at least the adjusted amount. If and when the IRS disallows the claim for the refund, you can appeal to a different court.

Conclusion

If you are being audited i.e. if the IRS is threatening to change your return in any significant way, pay close attention to your options to appeal their decision. When they issue the 90-day letter, don’t dilly-dally. 90 days goes by quickly.

Michael Anderson, Tax Lawyer In ArizonaWritten By:

Anderson Tax Law
2158 N. Gilbert Rd. Ste 101
Mesa, Arizona 85203

Phone: (480) 507-5985
Fax: (480) 507-5988
Email: [email protected]
Website: https://taxlawyeraz.com

Late Tax Returns? Six Big Reasons You Should Get them Prepared

time fliesTime flies when your having fun. As you get older, it flies by whether you are having fun or not. For people with multiple years of late tax returns, time flies whether they are old or not.

One tax return is missed because a IRS tax debt is lurking at the other end, and all of a sudden four years have gone by and 5 tax returns are late. Oh, and by the way, your 10 year old is now driving.

If you have several years of unfiled tax returns there are a number of reasons why you should straighten your tie, take a deep breath, and get the returns done.

JAIL

Most non-filers don’t go to jail. However, one missing return can be considered a crime. The IRS goes after the high rollers and “Moms and Pops” alike.

It just isn’t worth the risk to wait. Especially when there is a likely solution, even if long term, to deal with the debt.

PENALTY

The penalty the IRS tacks onto the debt for failing to file can be as high as 25%. After a few years, 25% with interest can amount to alot of dough. Just filing the return on time prevents this from happening. The return needs to be filed anyway, so why wait until it’s late and incur the penalty.

LOSE THE REFUND

There is a little known and very strange rule the IRS has. If you file a tax return more than three years after it was originally due…you lose your refund. They get to keep it and no, there really isn’t any amount of begging that will get it back.

The IRS “collects” millions each year because people who are entitled to a refund don’t file on time.

Not filing because you will owe? I can see that line of reasoning, it has a certain logic to it, but not filing when you will get a refund? Not logical at all.

AUDIT

Don’t you think it makes sense that a late filed return may get a bit more attention? Especially if an IRS Revenue Officer is looking at the return with her own eyes as she determines whether to stop your levy or not.

SUBSTITUTE RETURNS

The IRS has the authority to use what has been reported to them, stick a standard deduction to it and call it a return. It doesn’t even need your signature.

TO REPEAT for those guys staring at their I-Phones when I said that…

The IRS gets to do the returns for you and they don’t use any basis amounts for stock sales, gambling winnings or home sales. They don’t deduct your business expenses from schedule C. They don’t include the emergency room cost of your 8 year old’s broken arm.

They don’t need your signature.

This is a very common problem. A problem that usually results in large, overstated debts that are used to beat you over the head…OR more commonly to levy accounts and garnish wages and keep you up at night.

There are other large problems associated with these types of returns i.e substitute returns.

If the IRS files this substitute return, you do not have a “right” to challenge it if 90 days pass after it’s assessment.

Oh sure, you can ask them to replace it with the correct return, and they probably will…but they don’t have to. Not nice.

The other…if you ever need to discharge this particular debt in bankruptcy, probably isn’t going to happen, at least not in Arizona.

IRS COLLECTION

Most people can’t formally stop IRS collection without filing a bankruptcy case… unless their returns are filed. No, I didn’t say most people can’t file for bankruptcy unless their returns are filed, although that is arguably correct.

I said…it is a mistake to wait until your bank account is frozen to do six tax returns. You need to be “compliant” to stop the IRS collection machine, in most cases.

Conclusion and a few more items.

Having said all of the above…there are reasons you may want to:

1. Consider speaking to an Arizona Tax Attorney before preparing the returns OR

2. Have the Tax Returns prepared but don’t file them until you have spoken to an Arizona Tax Lawyer.

For some people it may be very important to create some attorney client privilege related to the return work. So even if you are using a CPA or tax preparer, you may want to involve the Attorney first.

For some other people, it will be important to know which years may not need to be filed and whether certain returns need to be filed at specific times.