Understanding IRS Collection Letters and What You Can Do About Them
Receiving a notice or letter from the IRS is not a pleasant experience for anyone. But if you owe back taxes or are a delinquent in tax filings, it is crucial to understand what the IRS collection letters mean and how they can impact your life!
TLDR;
Receiving a letter from the IRS can be intimidating, but it is important to understand what each of these letters mean and how they can impact your financial situation.
The IRS will send out the Collections Letters: IRS CP501, IRS CP503 & IRS CP504 to give you the legal warnings
IRS Letter LT11 or 1058 is the Final Warning before action is taken
You may qualify for Tax Relief or Settlement if you are unable to pay your tax debt & Appeal the IRS LT11 or 1058
The process of receiving a collection letter from the IRS is never an easy one, but by learning how to appropriately respond, you can take the necessary steps to protect yourself and your assets.
So, let us delve into this topic and decipher these infamous collection letters sent from the IRS!
The Internal Revenue Service sends you various collection letters to inform them of their obligations. The three main letters to watch out for are
CP501
CP503
CP504
These letters are gradually more aggressive as time goes on, and it is essential to understand what each of them means. CP501 is a notice that the IRS Collections dept issues whenever there is an assignment to the collections dept for a tax year of unpaid taxes. CP503 is the second notification sent when the initial balance has not been paid. The CP504 is the final warning that you have not paid the tax balance, and the IRS may pursue enforced collection by placing a levy on your income sources, issuing a federal tax lien, or revoking your passport.
Surprisingly, the IRS is sending out these letters, because they do not yet have the authority to take any actions. The series of letters that were sent is done because they have to give you proper notice before they take any action.
IRS Letter LT11 or 1058 is the final notice the IRS gives you prior to taking action.
Once the IRS sends the Letter LT11 or 1058, the IRS can commence collection activity, including levies, garnishments, liens, and passport revocation. Fortunately, there are ways to prevent the IRS from taking involuntary collection action against you. One way is to request an IRS Tax Relief program. The other way is to file an appeal. Filing an appeal with the IRS promptly after receiving a collection letter halts most collection activities.
When requesting an IRS Tax Relief Program, ensure that you are choosing the program that best suits your needs. Here are some tax relief options that taxpayers can consider: Installment agreement, Offer in Compromise, Currently Not Collectible status, and Bankruptcy. Each program has its advantages and disadvantages, and it is recommended that you speak with a professional tax attorney before choosing a tax relief program.
One issue that many taxpayers face is the fear of facing the IRS alone. There are many others that have attempted to resolve their tax issues, only to rub into IRS dead ends.
However, you can always enlist the help of the Tax Relief experts with Semper Tax Relief who can help you understand your options and represent you before the IRS.
Failure to take swift action when you receive a notice from the IRS may put you at risk of being placed in a financially strapped position.
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IRS collection letters are notices sent by the Internal Revenue Service (IRS) to inform taxpayers about their outstanding tax debts and the actions that may be taken if the debts are not resolved.
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You may receive an IRS collection letter if you have unpaid taxes, and have passed the deadline for the payment of taxes
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It's important to respond to the letter promptly. Review the letter carefully, understand the issue, and gather any necessary documents. If you agree with the IRS's Tax BIll. If you are able to pay the amount owed, mak eth repayment. If you disagree, you will need to submit the proper substantiation to the department that will process your tax relief request.
You can also request one of the tax relief programs available to you, such as the Offer In Compromise Program, Currently Non Collectible Program, Innocent Spouse Relief.
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If you can't pay the full amount owed, you have several options. These include setting up an installment plan, requesting a temporary delay of collection, or on of the Tax Relief options such as submitting an offer in compromise to settle for less than the full amount, Currently Non-Collectible Status, or a Hardship Payment Plan
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Itr might be possible to negotiate with the IRS to lower the amount you owe through an offer in compromise. This option allows you to settle your tax debt for less than the full amount if you meet certain criteria.
What else is important to know is when the Collection Statute Date of the balance is. This may determine if there is an alternative program that might be more beneficial such as the Currently- Non Collectible program or a Partial Pay Installment Plan.
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Ignoring an IRS collection letter can have serious consequences.
The IRS can take further action, such as issuing a tax lien, levying your assets, or garnishing your wages.
It's crucial to address the issue and communicate with the IRS. The last notice will be sent through certified mail, and the letter will state the final warning.
The best way to deal with this problem is head-on, and for you to take action before the IRS takes action.
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If you believe the amount of tax the IRS is collecting iss incorrect, you have the right to dispute the amount with the IRS.
Several options exist to dispute the amounts such as an amended tax return, Identity Theft Claim, or a doubt as to liability program. The burden of proof is up to you to show the IRS.
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If you can't pay the full amount on the CP504, review your original tax filings to see if an amended tax return is possible or if one of the following tax relief programs may apply:
1) Temporary time to pay ( & Penalty Forgiveness)
2) Payment Plans ( & Penalty Forgiveness)
3) Penalty Forgiveness
4) Offer In Compromise
5) Non-Collectible Status - Financial Hardship Status
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There are different grounds for appealing the IRS's actions. When the IRS issues a CP504 notice, the appeal available is the Collection Appeals Program or CAP Request.
A CAP request is a fast-track appeals program that is different from a CDP or Collections Due Process Hearing. A CAP request is designed to have an IRS Collections Manager review the legality of the notice & resolve the account with you. If the account is not resolved with IRS Management, the IRS Office of appeals will review the account.
When the IRS mails you the LT11 or 1058, you file a Collections Due Process hearing to have an IRS Settlement office with the office of appeals review your request for a collections alternative solution.
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Yes, the IRS will charge interest and penalties on unpaid taxes. The interest accrues daily, and the penalties may include failure-to-pay penalties, failure-to-file penalties, and other charges. It's crucial to address your tax debt as soon as possible to minimize these additional costs.
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Yes, seeking professional help from a tax attorney, certified public accountant (CPA), or enrolled agent (EA) can be beneficial when dealing with an IRS collection letter. They can provide guidance, negotiate on your behalf, and help you understand your rights and options.
Semper Tax Relief specializes in resolving tax debt with the IRS. T get started we offer a free case review to analyze the best program you may qualify for.
It is essential to pay attention to all IRS letters, especially those related to collections & sent by certified mail.
They are meant to provide you with due process and a chance to redress any grievances before the IRS can start the process of taking involuntary collection actions.
The IRS Tax Relief Programs are readily available for those taxpayers who qualify. Such programs can help you get back on track with the IRS and avoid being subject to aggressive enforced collection action, including levies, garnishments, liens, and passport revocation.
Therefore, if you receive a notice from the IRS, we can review your situation to navigate the process and create a strategy that works in your best interests.
