5 Commonly Used Ways To Deal With IRS Debt

Faced with large tax debt and feeling hopeless? Take heart…if you are willing to create a “strategy” and combine it with some hard work and patience, there may be a real solution. The following are the most 5 common methods people use to deal with tax debt.

1. Use the IRS Statute of Limitations to Your Advantage

Congress limited the time the IRS has to figure out how to get paid.  26 U.S.C Section 6502 provides this limit and as a result, the IRS has ten years to get the debt collected. Many people with IRS debt buy the time necessary to get to the 10-year period by negotiating an installment agreement or non-collectible status placement.

An example:

Imagine a tax debt of $120,000.00 and that the IRS has let 7 years pass without fully attempting to collect the debt, but they are now at the doorstep. The debt has grown to $200,000.00 with penalty and interest over time, but the taxpayer can only afford to pay $100.00 per month toward the balance. If the taxpayer were able to negotiate such a payment, only $3600.00 of the $200,000.00 would be paid before the debt disappeared.

The above scenario happens more often than you would think. However, there are things people do that stop the ten-year clock from running. Filing an offer in compromise, a bankruptcy, a collection due process appeal, or anything else that stops the IRS’ ability to collect also stops the statute of limitations clock from ticking. It isn’t always advisable to do anything other than to negotiate the payment plan or non-collectible status as a result.

2. Challenge the Tax Debt

What about a situation where the IRS assessed a debt against you that you know isn’t correct.

Usually, this is the result of an audit “gone bad” or the creation of a tax return by the IRS, because you didn’t file it yourself.

Audit Appeal

IRS Audits that go badly can be appealed. If done right, they can be appealed to the US tax court. If your audit result is wrong, you have a limited amount of time to bring the appeal, so call someone now.

Substitute Tax Return Appeal

Tax returns filed by the IRS come with appeal rights as well. Most people don’t respond in time and lose them, however. Thankfully, the assessment of the tax from the incorrect return can be challenged using the IRS audit reconsideration process.

Challenge Trust Fund Recovery Assessment

There are other things the IRS does to assess tax debt that can result in an incorrect debt amount, like the assessment of the trust fund recovery penalty against a responsible party.

Where the business has withheld the employee portion of the payroll tax but didn’t send it in, the IRS stick the amount on you personally as a penalty if you are the “responsible” party.

There are defenses to this, however, and the assessment of the debt can be challenged as a result.

Innocent Spouse Relief

Sometimes the tax is correct but it just isn’t fair that the spouse should be stuck with it. The law provides the ability to challenge the debt based on some theories about innocent spouses.

3. File an IRS Offer in Compromise

26 U.S.C Section 7122 provides the basis for the settlement or one-time reduction of the tax debt. In essence, you would be making an offer to compromise and settle the back tax liability. But this isn’t horse-trading.  The amount that the law requires the IRS to settle for is based on objective criteria. The criteria is called the IRS reasonable collection potential or the RCP.

In theory, the RCP is the amount that the IRS could collect from you before the statute of limitations period on collection runs out.

The vast majority of offers filed in the last several years fail primarily because the RCP calculation is rigged a bit in the IRS’ favor. The IRS is allowed to use as a starting point for calculation purposes, a budget that is based on averages they have created.

For instance, they may have pre-determined that a family of four only needs $1650.00 per month to pay for all housing and utilities expenses. That family may be actually spending $2100.00 per month. If in the end, the IRS were able to use the $1650.00 figure to determine the RCP, then the amount of extra income per their calculation would be at least $450.00 per month.

If the statute of limitations period remaining on collections is 8 years than the RCP, just based on this number could be as high as $43,200.00

Typically, the IRS must use a smaller multiplier than the statute period, but even then, you can see how quickly the RCP can grow.

Successful Offers in Compromise, require much thought and planning as a result. They shouldn’t be entered into lightly.

4. Bankruptcy

Bankruptcy and its relation to tax debt are misunderstood. Many people including many attorneys believe that bankruptcy can’t resolve income tax debt. Nothing could be further from the truth.

In fact, the treatment of the tax debt is not up to the IRS. The Bankruptcy Code governs the treatment of the debt. The Bankruptcy Code says that income tax and certain other tax debts can be wiped away in bankruptcy, if it meets certain date requirements and the taxpayer didn’t cheat.

Sometimes the date requirements haven’t been met yet and we guide our clients in negotiating a payment plan or non-collectible status to help them avoid collection activity while they wait for those dates to arrive.

5. Penalty Abatement

As a taxpayer, you have the right to request the cancellation of any IRS penalty. There are more than 140 penalty provisions and they all have a good faith exception.

If you have been penalized for something like a failure to pay the tax on time, but you acted in good faith and there exists some reasonable basis for the failure, then the penalty can be removed along with interest on it. This removal often makes it easier for you to deal with the underlying debt.

 

Written By:

Michael S. Anderson, Attorney
2158 N. Gilbert Rd. Ste 101
Mesa, Arizona 85203

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

IRS Letter CP504 And IRS Letter LT11 – What’s The Difference?

The law under Internal Revenue Code Section 6330 requires that the IRS send out a “Final Notice of Intent to Levy” before it can actually levy an account or garnish a wage.

It usually follows the law in this regard, and sends a specific letter out by certified mail typically designated as an LT11 Letter in the upper right hand corner.  (Sometimes this letter is designated as an L1058 letter instead).

This letter provides you some due process by allowing you to ask for a hearing within 30 days…so that you can propose an alternative to collection.  Until that hearing is finished, the IRS can’t move ahead with garnishment or levy.

The IRS doesn’t like this roadblock.   It will almost always send out a different letter before the LT11 letter that looks almost exactly like the LT11 letter but with a different code in the corner.

That code is usually “CP504”.  The CP504 letter looks very similar to the LT11 letter in that it:

1.  Contains language that says “Notice of Intent to Levy”.

2.  States the amount of tax debt that is due immediately.

3.  Tells you that it’s going to seize or levy your state tax refund or other property.

4.  Threatens to do it if you don’t call immediately or pay the amount due.

But…this CP504 letter doesn’t contain any language telling you that you have the right to appeal.

Why does it do this?  Perhaps a bit of trickery.

The IRS knows most people with tax debt aren’t aware of their due process rights when it comes to tax collection.  It hopes that by sending the CP504 letter first…you will respond out of fear and work out a deal that put’s it at an advantage and then…ignore the LT11 letter when it comes removing your ability to discuss your situation with IRS appeals.

Don’t misunderstand me…the CP504 letter is serious and it means that the IRS is actively searching for you and it’s on the way.  But it doesn’t mean that you are in imminent danger of having your stuff taken.

If you’ve received a CP504 letter you should use it as a signal to get your return filing in order, your with-holdings current, and to discuss your options with experienced help… so that when the LT11 letter arrives… you can appeal if necessary and be ready to propose an alternative that most benefits your unique situation.

17 situations when the IRS won’t collect

taxes-man-being-shakenTax Debt left unattended will result in IRS collection activity…levies, liens and property seizures.

IRS collection activity just doesn’t stop on it’s own. It will happen after the tax debt has been:

a.  Assessed  (entered into the books as a debt)

b.  You have been sent a notice of the debt and demand for payment and you don’t pay. AND:

c.  You received a “final notice of the IRS intent to levy and a right to a hearing” at least 30 days before the levy actually occurs and to your last known address.

But even if you have a tax debt and are concerned about losing most of your paycheck, there are a number of situations in which the IRS collection activity can’t or won’t occur:

1. INSTALLMENT AGREEMENT IN EFFECT

If you have negotiated a formal payment plan (or non collectible status) with the IRS and you have been making timely payments, the IRS cannot collect.

2. 30 DAYS AFTER TERMINATION OF INSTALLMENT AGREEMENT

If the Installment Agreement is terminated for any reason, the IRS cannot collect for a 30 day period after it issues you it’s termination notice.

3. DURING APPEAL FILED WITHIN 30 DAYS OF INSTALLMENT AGREEMENT TERMINATION

If the Installment Agreement is terminated, and the IRS has provided you a 30 day notice AND you file a proper appeal within that 30 day period, the IRS can’t collect until the appeal is heard.

4. OFFER IN COMPROMISE IS PENDING

The IRS won’t collect while an properly filed Offer in Compromise is being considered.

5. DURING APPEAL OF REJECTED OFFER IN COMPROMISE

You have the right to appeal the rejected Offer in Compromise internally with the IRS. The IRS won’t collect during that period and until the hearing is complete.

6. DEBT ASSESSED BUT FINAL NOTICE OF INTENT TO LEVY HASN’T BEEN ISSUED

The IRS can’t collect until 30 days after it sends a “Final Notice of Intent to Levy” to your last known address.

7. DURING COLLECTION DUE PROCESS APPEAL FILED AS A RESULT OF RECEIVING THE FINAL NOTICE OF INTENT TO LEVY

The “Final Notice of Intent to Levy” provides the right to file an appeal. That appeal is called a “Collection Due Process Appeal”. If filed properly and you can prove the IRS received it, the IRS cannot collect until the hearing has been completed.

8. DURING A BANKRUPTCY PROCEEDING

Section 362 of the Bankruptcy Code creates an “automatic stay” that stops all creditors…yes even the IRS from collection activity. (Bankruptcy is helpful in other ways as well. It can even eliminate certain tax debt)

9. AFTER THE STATUTORY DEADLINE ON COLLECTION HAS RUN OUT

The IRS has a certain amount of time to collect a debt. 10 years to be precise, from the date the debt is assessed. Once that happens, the debt doesn’t exist. (Calculating the 10 year period isn’t always as easy as it seems)

10. NOT ENOUGH EQUITY IN AN ASSET

When the IRS is trying to grab an asset it must make sure that the asset has value above what is owed the bank on it. i.e. there must be “sufficient net proceeds” from the sale to apply some money to the debt. If you vacation home is worth $100,000.00 and you owe the bank $120,000.00, there is not equity and therefore no IRS collection.

11. IRS CONSIDERING THE SIEZURE OF YOUR PERSONAL RESIDENCE

The IRS won’t just slap locks on the door of your home. It must first file a case in the US District Court asking for formal approval. This is a relatively rare procedure.

12. IRS CAN’T SIEZE CERTAIN PERSONAL ASSETS

The IRS is barred from taking household goods and furniture worth up to $7900.00. It also can’t take child support, unemployment checks or clothing.

13. BUSINESS ASSETS OF AN INDIVIDUAL

The IRS won’t take your business assets if you have other assets that will pay the debt. Even if you don’t and it tries to take your business assets it must obtain approval from an IRS Area Director.

14. INNOCENT SPOUSE CLAIM

The IRS will stop collection when an Innocent Spouse Claim is properly filed and appealed.

15. DEBT IS INCORRECT

If you can provide some proof to the IRS Collection personnel that the debt is probably incorrect, it is supposed to slow down the collections process until the debt issue can be resolved (IRS Policy Statement 5-16)

16. IRS SUMMONS

If the IRS has issued a Summons, collection activity can’t occur on the date you appear to meet with the collection personnel.

17. HARDSHIP

The IRS will suspend collection activity if you can prove that the collection result will create a real hardship i.e. power will be turned off, kicked out of apartment, inability to eat etc. This suspension is only temporary if you can’t than provide additional required documentation within a certain time-frame.

IRS to begin using private collection within months

dl4In September of last year, the IRS issued a notice indicating an intent to use private debt collection services.  This is going to become reality when the collectors begin handling old accounts within a few months.

The IRS will send a notice explaining the details and the private debt collection agencies will also send a notice out explaining that it will not be enforcing debt collection.

These debt collectors will be subject to the Federal Fair Debt Collection Practices Act that imposes a penalty on collectors that don’t follow specific noticing rules, “abuse” the debtor, call the debtor’s friends and family etc.  The IRS isn’t subject to this act of course.  These collectors will have to identify themselves as contractors for the IRS and not as the IRS itself.  They also won’t be able to issue levies or take any time of affirmative action to collect the money other than to make contact.

Nonetheless, I anticipate a great deal of confusion as a result of the legitimate fears we all have of identity theft and other related problems.  Tax debtors will not be sure who to trust when receiving a call or a letter and criminals will likely find a way to take advantage of this.

If you receive a call or letter from a collection agency for the IRS, be careful about the information you provide.

 

Differences between the IRS CP504 letter and the IRS LT11 letter are important to understand

downloadIRS CP 504 Letter vs. IRS LT 11 Letter

The IRS likes to remind you about tax debt.  As part of it’s collection process it sends these reminders in the mail with bold lettering that says “NOTICE OF INTENT TO LEVY”.   Most people don’t know however that there are two types of Notice of Intent to Levy letter.  The first is a “CP 504” and the second is an “LT11”.

Differences between the IRS CP504 letter and the IRS LT11 letter are important to understand.

The CP504 letter states that it is a notice, it includes the debt amount, years owed, and it typically states that the IRS intends to seize your state tax refund or other property.  It then threatens the seizure of assets again if no call or payment is made.

To the average person this letter tells them that levy will be happening and soon.

But…the CP504 letter is a “toothless” letter.  It’s toothless because the IRS can’t actually levy anything until it sends out the second letter, the LT11.

The Internal Revenue Code section 6330 requires the IRS to send notice letters before it can levy but as part of that notice it must inform you of your right to file an appeal of the collection activity within 30 days of it’s mailing.   The LT11 letter contains that language and the form needed to file the appeal along with instructions.  The LT11 letter is also sent by certified mail to your last known address.

 

It’s important to understand the difference between the two letters for a few reasons:

1.  If you receive a cp504 letter you know that you still have time to get legal advice and plan your case in order to best take advantage of the law before proposing a solution to the IRS or filing a bankruptcy.  You don’t necessarily want to approach the IRS prematurely.

2.  If you receive an LT11 letter, you can appeal collection activity allowing you more time to prepare the case.

3.  If you receive an LT11 letter, you can appeal and preserve your rights to challenge the IRS’s eventual decision to Tax Court.

4.  Once the 30 day timeframe is passed after the LT11 mailing date, the IRS can and will levy.

What you should do if you owe

If you owe the IRS, and don’t know whether the LT11 letter has been issued, you need to obtain an IRS account transcript.  This transcript will tell you whether a “real” Final Notice of intent to levy has been issued and when.

If it hasn’t been issued on the year in question then you are safe from IRS collection for the time being.  Instead of calling IRS collection, you should use the extra time to learn more about your options and create a plan if one is available to make your situation better for purposes of reducing or eliminating the debt.

If the LT11 letter was issued, it was to the most recent address the IRS had on file, and more then 30 days have passed, you are subject to levy and should expect it.

There are ways to stop the levy process even if the 30 day period has passed.  An equivalent hearing request can be filed in certain circumstances, a payment plan request, an offer in compromise filed or even a bankruptcy.  Which option you use will depend on your situation.

michael-anderson-tax-lawyer-mesa-azWritten 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

 

 

Self Employed? Pay your estimated taxes monthly

plowing-fieldThe Robert Burns poem To a Mouse, written in 1786, is an apology.  The story has it that Mr. Burns upended a mouse’s home while plowing a field and felt bad about it.  To make amends, he wrote a poem, the most famous portion of which reads:

But little Mouse, you are not alone,
In proving foresight may be vain:
The best laid schemes of mice and men
Go often askew,
And leave us nothing but grief and pain,

John Steinbeck, the author of the 1937 Novel….Of Mice and Men, borrowed from Burns’ poem when he titled the book, and this may be the reason we think of “Mice and Men” when our own grand plans go awry.

Every time I meet a self-employed client with tax debt,  grand plans are part of the discussion.  But the road to success is difficult, and grand plans get sidetracked by things like taxes.  Many people who are self-employed don’t withhold enough, and the IRS does it’s best to leave nothing but “grief and pan” when this happens.

It files incorrect tax returns, assesses penalties, and uses these to levy bank accounts and assets.

Everyone who goes into business for themselves has the intention to follow the law and make it work.  The plan is to make money, pay business expenses, quarterlies, and live a comfortable life.

But…running a small business is hard thing to do, and even the best laid plans…”go often askew”.

Contract’s are broken, clients don’t pay on time, competition grows like a weed, and the un-foreseen is around every corner.

The IRS makes it worse in it’s never ending quest to enforce the Government’s agenda of re-distribution.

The best solution short of winning the lottery, may be to stop making quarterly payments altogether.

No, don’t become a tax “protestor”,  just start paying monthly instead.

It’s too hard and there are too many twists and turns for most small businesses to hold onto the tax funds for an entire quarter.

Paying each month turns the tax bill into a bill just like any other.  It saves you from needing a separate account, and it eliminates the desire to use the funds for every emergency that pops up.

You can send the payment to the same address you would have sent your quarterly payments.  Write your social security on the check (assuming you are using your social as your ID for the business) and include “estimated 2016 liability” in the memo.

 

michael-anderson-tax-lawyer-mesaazWritten 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

 

How does the IRS know so much about me?

imagesThe IRS is in the business of collecting money and it has some advantages that other money collectors don’t have.  

Your employer submits a report of your income each year to the IRS.  If you are self employed, your vendors or others send the IRS a 1099 misc. form.  The bank sends the IRS a 1099 INT form if your bank account draws interest.

The bank, your employer and those you do business don’t want to disclose your private info to the IRS, they are simply required to.  As a result, the IRS knows where you work, what type of business you own, and where you bank.

Sometimes the IRS learns more about you because you have spoken to an IRS representative and provided your information either in writing or verbally.  You may have even  mailed the IRS a check at some point in the past that is now being used to locate where you bank.

Once in a while an IRS inquiry will appear on a credit report.  The IRS is allowed to look at a credit report in order to search for sources of money.  (See I.R.M 5.19.4.3.5)

Sometimes the IRS just doesn’t have any information.  Maybe you don’t bank or your bank account doesn’t draw interest.  Maybe people you do work for, don’t file 1099s or aren’t required to.  In situations like this, the IRS may assign a local person to investigate the situation.  This person is called a revenue officer and they will, if assigned to your case, find where you live and knock at the door in attempt to get this financial information from you.

So now we know how the IRS knows about you…the real question is, what does the IRS do with this information?

First, if you haven’t filed returns for a few years, the IRS will use the reported information to create tax returns for you called IRS substitute returns.

Second, it will use the information it gathers to garnish wages and levy accounts.

If self employed or working as a subcontractor, the IRS can only levy what the company you are doing work for owes you at the moment the levy is received.  There is no continuing levy on pay that is based on a 1099 or subcontractor relationship.

But…if you are employed, paid wages, and have taxes withheld from your paycheck, the IRS can garnish your check continuously by submitting one levy notice to your employer.  That garnishment won’t stop until certain conditions are met.

Disclosure of Information to the IRS can be a good thing.

Most IRS collection matters require you to fully disclose all of your assets, banking info, income etc. in exchange for a resolution of the problem and a hold on collection activity.  However, if the IRS didn’t have the information you provided to it before, and you don’t reach a resolution, then you will have given it a roadmap making it much easier for them to collect.

When you have an IRS tax debt, you need to know what information the IRS already knows about you and what more you need to disclose if anything to get the result you desire.  You may want to try to settle the debt in an offer in compromise, you may want to challenge the IRS’ substitute returns by filing correct returns, you may want to consider bankruptcy or other options.

 

Legislators consider private IRS debt collection

Boston_Tea_Party-CooperThe U.S. Senate passed it’s version of a bill meant to fund the highway system, but included language in the bill that would privatize much of the IRS’ collection responsibility.  The U.S. House of Representatives is working on it’s own highway bill and may just include a similar provision.  (The House GOP Wants Private Debt Collectors To Take Over IRS Jobs – Huffington Post)

The Huffington Post Author covering the development sounds worried. I mean really, most people who owe the IRS are broke and private dead collectors abuse broke people, right?

Now…I don’t necessarily disagree that most people who owe the IRS are living paycheck to paycheck, and I don’t disagree that private debt collectors have a reputation for being meanies and using meanie words.

But the Author may want to consider a few things about the IRS:

First, thanks largely to a progressive tax system that punishes hard work and ingenuity and that the IRS enforces, the American economy has no edge.  Poverty is growing.

Second, debt collectors are meanies sometimes, but the idea that the IRS collection system is any less “abusive” than private debt collection is absurd.  IRS collection is abusive by definition and it’s abusive in reality every single day.

Making the second point is easy.

The IRS needs nothing more than 30 days of time after the issuance of a final notice letter to seize most of a paycheck.  No lawsuit needs to be filed, and the burden of proof is on the taxpayer to get out of a jam.

I spoke earlier this week, to a young mother of 4 whose husband earns $45,000.00 per year.  His paycheck is being levied and much of the check is taken. He has tried to stop the levy by speaking with IRS collection, but the IRS won’t stop it until he provides a financial statement disclosing all of the families private financial information, and two missing tax returns that re-disclose private financial information.

Of course, the Husband isn’t aware of the short term hardship provisions that exist, but the IRS collection department didn’t explain that option to him, and has forced him to seek help, while trying to keep his job and feed his family.

I can’t count how many clients have complained to me about the attitude an IRS Officer used during a discussion.  If the Author doesn’t think IRS collection personnel don’t “dress down” taxpayers, he needs to ask around a bit.  Throwing some private debt collection into the mix will be nothing new.  The Huffington Post Author shouldn’t kid himself.

 

 

IRS problems don’t just go away – put the fire out

c4jt321IRS problems don’t just go away.  The cartoon is a clumsy way of making the point.

The point is that you have to do something.  You can’t ignore the problem and just go about your business. Your house is on fire and you may not realize it.

The most common “house-fire” we see is that of a self-employed person who hasn’t filed tax returns in several years.

When this person comes into the office, the house is already burning as one or more of the following problems exist:

  • The IRS has completed certain substitute tax returns that overstate the debt, because several years’ returns haven’t been filed
  • The IRS is using these returns to levy the bank account and to file IRS liens.
  • The IRS has issued levies on vendors and others that may owe the owner money.
  • The business is weakened or worse, because the owner has lost access to funds in the bank account and lost valuable goodwill with vendors and others
  • Because the owner waited so long, legal options available are fewer or require making more painful trade-offs
  • Much of the work needed to try and put the fire out has to be done quickly and without the benefit of necessary information.

These problems all started years before when the owner either didn’t withhold enough tax or withheld employee tax and didn’t pay it.  Instead of making the hard choice to change the business or dump it, he or she sat still and didn’t file returns out of fear.

If you haven’t filed returns and are fearful of what comes next so you aren’t moving on it, you need to do something now.  I suggest you do the following:

  • Gather your tax records for years you think are un-filed – bank statements, expense documents, etc.
  • If you have lost your documents – contact your CPA or my office about making a good faith re-creation of the numbers
  • Gather your current income, budget and asset information
  • Look closely at your income and budget – become very familiar with both.
  • Figure out how much tax you should be withholding on a monthly or quarterly basis and start doing it

Some good new about the fire:

  • It is often the case that if the IRS hasn’t already filed returns for you, the returns required are limited to the last six year period.
  • If the IRS has done returns, they are probably incorrect as they don’t contain business expenses, deductions etc. and you should be able to create the correct returns and replace the IRS returns.  This usually reduces the debt.

Once the required returns are done, the fire can be stopped, as most people qualify for one or more of the following options:

  • Non-collectible status – which means nothing is paid on the debt while the 10 year clock on collection runs
  • Settlement of the debt once and for all for less than what is owe
  • Discharge the debt in bankruptcy
  • Full pay payment plan
  • Payment plan that is “partial pay” meaning that the payment isn’t large enough to pay the debt off before the statute of limitations clock runs out
  • Qualify for “innocent spouse” relief

Cartoon Credit – KC Green

The IRS Final Notice of Intent to Levy or why you should always open your mail

Vintage_mail_bag_at_the_Postal_Museum

The IRS Final Notice of Intent to Levy or why you should always open your mail

I’m surprised at how often my clients bring me a box filled with un-opened mail from the IRS.  To tell you the truth, most of it is junk.

Reminders to pay, debt breakdowns, letters requesting missing tax returns, etc. But hidden within each stack of stuff is almost always a letter I wish the client had opened when it arrived by certified mail.

That letter is called the:  IRS Final Notice of Intent to Levy

Now normally…the IRS will send you several letters telling you it is going to levy before it sends this one.  To most people they all look the same.  This final notice of intent to levy letter isn’t a common letter though, and if you don’t open it on time, you will lose some rights that could have helped you to solve your IRS debt problem.

Why it is so potentially helpful to you?

First, you have to understand that the IRS is required by law to send this letter in order to give you some “due process”.  Not much due process, but just enough to help you figure things out.  You are entitled to an appeals hearing with a supposedly impartial settlement officer on the issue of whether the IRS should be able to levy your bank accounts and garnish your wage or whether there is a alternative that suits the need of you and the IRS more sufficiently.

While waiting for that hearing, the IRS isn’t allowed do any of these nasty things.

In order to get this appeal hearing and exercise your due process rights, you should file the appeal request within 30 days of the date of the letter.  Of course you can’t do that if you haven’t opened your mail.

So when you do open your mail, look closely at it. If you see an LT 1058 or LT 11 somewhere on the letter, it should be this final notice letter we are talking about.  Read it closely.  The appeal documentation and some instructions should be with the letter.

If you feel like you need help filing the appeal call someone who knows how they work.

After you file the appeal, start putting together your financials in detail.  You will need them along with some other IRS forms at some point during the appeals process.  If you don’t take the appeals hearing seriously and fail to supply the correct info and make the right argument, you will lose the appeal and head back to IRS collections for some smacking around in the way of Levy or Garnishment.

What if you opened the letter but didn’t file the appeal on time?

Don’t panic, you can still file the appeal, and the IRS should…give you an appeal hearing anyway.  It’s called an “equivalent” hearing.  (Equivalent to the Collection Due Process Hearing, get it?)

The main difference between the equivalent hearing and the collection due process hearing is that one comes with further appeal rights to tax court and the other doesn’t.

Other more subtle differences exist like, the IRS doesn’t have to grant the equivalent hearing and in some cases it won’t, and you have to file the request for the equivalent hearing within a year of the date of the final notice letter.  A hint..don’t wait a year.

So open your IRS mail, or bring the box to me.  We have a sharp letter opener.