Understanding And Responding To IRS Letters And Notices
This tax relief article will give you better information about how to respond. Each letter can be found on the IRS web site. Just Google the letter or form number and select the sites you want explanations from, including the link to the IRS web site.
Sample Of IRS Letters & Notices
Please read my descriptions for each letter. Even if you didn’t get that letter, the descriptions contain a sample of IRS letters & notices useful information that these letters contain. It should help you understand the IRS letters better.
Great Tax Reduction Technique
What if you get a letter from the IRS charging you additional tax based on a math error or a clerical error? How would you like to avoid paying it? Here’s how… write back within 60 days and say you request an abatement under section 6213(b)(2). This may get it abated. It’s worth a try. Sometimes they reassess it, but they must issue a “notice of deficiency” giving you appeal rights. Include in the letter a statement that you disagree with the additional tax and the action you want taken, such as “I disagree with the additional tax assessment because I did everything correctly and I want you to remove the taxes.” Also state that if they don’t remove the taxes, you are requesting that they issue a notice of deficiency so you can file an appeal. The notice of deficiency will list the changes that they made. (Often you get a correction letter that doesn’t spell out why they made the changes in the first place.) Use this approach for letters involving a missing SS# (supply the number and copy of Social Security card if you have it, in your letter). Send your letter to the address they request you respond to. Never be afraid to call or write for an explanation of the letter or the adjustments being made. You may just want to pay it, or if you are contesting it, you have a better understanding of what you are contesting. If you do call for an explanation, do not give any information as to what and why you did anything! They will record it and it can be used to deny your request for abatement.
CP 11 We Changed Your Return You Have A Balance Due
This notice reflects adjustments the IRS made to your return and the effect it had on penalties and interest. If you don’t agree, speak up now, usually the longer you are in the collection process the harder it is to undo things. If you don’t understand why the changes were made, contact the IRS and ask. You don’t have to answer questions beyond the verifying questions to prove that you are you, or make promises of when you will make payment. Just say you will call back soon after looking into the matter.
Letter 11 Final Notice Of Intent To Levy
And notice of your right to a hearing. You have 30 days to appeal. I prefer solving the case before that time and getting the R.O. to hold off on the levy. Appeals are time consuming, and still won’t solve the compliance issues of filing delinquent returns, and payment issues of paying delinquent taxes. If you can’t file the delinquent taxes and fill out the collection information statements within the 30 days, call the R.O. or ACS and explain your great desire to cooperate. Give them what they want, give them some answers they want, and you will probably be given more time. If not call back again. Don’t give up. You are allowed to have time to resolve your case.
CP 14 – Request For Tax Payment
This is your first bill for taxes due. A nice simple request for payment. The IRS feels that you still did not pay enough to cover the liability plus interest and penalties. This letter will go to great lengths to explain the interest and penalties, and often less about why you owe money.
This is a change based on the result of an IRS audit examination. You don’t even have to be aware of it! The IRS can and does conduct audits without your knowledge. If they think everything is O.K. then you probably will never know it happened. If not you will get a letter. You should respond with your proof for any items you want to claim are justified as staying the way you reported them. Or you can just agree to their changes. Often the reasons for the change are missing. How nice. Pull your third party payer information and see why they have different information than you. If you can’t get it in time, call and find out why. You may have to make a few calls. Hang in there.
CP 71A or CP 71D – Reminder Of Balance Due
Your annual notice of what is still owed. This notice will also inform you of your “currently not collectible” status. How nice of them!
CP 90 – Final Notice Of Intent To Levy And Notice Of Right To A Hearing
As it says, they will levy. The ball is in your court to fix what is wrong. To get into compliance and work out payment arrangements. You have 30 days to appeal the notice of levy. Not any other collection action by the collection division, not the tax in the first place, just the levy. You can appeal a lien separately as a lien appeal. You can appeal a collection action with a specific appeal for that. You appeal the tax by an offer, appeal, or tax court petition. I’ve had cases where my client started the appeals process, only to find out they didn’t understand what they were appealing exactly, so the appeal was lost. What a waste of time and money! Match your appeals properly.
CP 101 – Math Errors
This form consists of math errors they say you made computational errors, tax deposit errors, or no reply to additional information, etc. If they are wrong, correct them. If they are right, just ignore the letter.
CP 161 – Underpaid Tax
This shows the underpaid tax according to the IRS records. Pull your ROA and verify your payments and filing of returns. You will see how the IRS came up with the balance. If you owe it, pay it. Use www. eftps. gov if you are set up. Call the IRS office on the letter to resolve it. If you need to do an installment agreement or offer in compromise consult this manual.
CP 210 or CP 220 – Penalty Notice For Failure To Deposit
Check your records against the IRS. Check circular E and make sure you understand when to make your deposits, and how much they should be. You should not rely on IRS notices to tell you how often to deposit. You also must use the correct deposit method. Certain large employers must use electronic deposits and not regular bank deposits.
See CP-90 final notice
CP 501 or CP 502 – Reminder Of Balance Due, etc.
These are initial requests before the CP-503 and CP-504 are issued. You are in notice status now. Probably no collection action yet if this is your only IRS contact. What a great time to plan for your resolution with this guide!
CP 503 – Important Immediate Action Required
If you have received this notice, it means you have ignored the initial tax bill, CP-14, they skipped the CP-501 and CP-502 notices (or you received them prior to this), or your case is back in collections after being declared “currently not collectable” for a while. If you owe for more than one tax period, you will receive this notice even if you made arrangements to make installment payments, or you have been placed in a “hardship” status. It will say on the face of it to ignore it if you have entered into an installment agreement or paid the balance. As long as you have confirmed this, then you can ignore the letter.
CP 504 – Urgent We Intend To Levy On Certain Assets
This means that you have 30 days before they will actually levy a bank account or wages, etc. If you owe for more than one tax period, you will receive one of these notices each year. You may receive this notice even if you have made arrangements to make installment payments, or you have been placed in a “hardship” status. You may get this notice at any stage of collections. It requires immediate attention. See the chapters on working your case.
CP 515 – Request For Your Tax Return
If you have received this notice, it means you have failed to file a tax return, or at least the IRS has not logged in a copy on their computer system. The type of return and tax period will be shown in the upper right corner as well as in the body of the notice. File the return as soon as possible, otherwise your case will be transferred to an audit group who will prepare the return for you, without those necessary deductions you need to lower your liability.
CP 518 – Your Tax Return Is Overdue
Well now you know. Get it prepared and sent in. If you owe more than you can pay, then prepare to deal with the collection division. Luckily you can be prepared because of this manual.
CP 521 – This Is An Installment Agreement Payment Notice
As long as you are meeting your terms of your payment plan, there is nothing else for you to do. If you’ve broken your agreement, even if you didn’t receive this notice, take the initiative to immediately get back into your agreement.
CP 522 – Two Year Review For More Financial Statement Information
Be careful responding. If your income has gone up, your monthly payments to the IRS will probably go up too. Maybe your living expenses, especially medical, has increased too! You want to maximize deductions to offset any increase in income. If you need to lower your monthly payments, argue that too.
CP 523 – Notice Of Intent To Levy
Oops, either you defaulted on your agreement or the IRS isn’t posting your payments properly. Remember the IRS must receive payment by the due date of your monthly payments. They must also receive payment by the due dates for all taxes you are liable for. Not a day late or a dollar short. In the past they used to break your agreement and levy your account. Now, they give you about a week to straighten it out. Call and get it fixed.
CP 525 – 30 Day Letter To Appeal
This comes with your audit adjustment letter. It gives you 30 days to appeal if you disagree with the adjustments. It’s a good idea to prepare this appeal along with your continued arguments and give it to the auditor. This way you protect your rights if you and the auditor disagree about the changes.
CP 531 – Notice Of Deficiency
This shows how much you owe for each year, and how to dispute the adjustments. In many dispute cases you must pay first, and then file a claim for refund. Otherwise you have 90 days to file a tax court petition.
CP 566 – Initial Contact Letter On An Audit
Be glad you received it. Many audits take place without taxpayer notification. At least you get a chance up front to defend your positions. Make sure you prepare properly.
Form 668W – Wage Levy
Fill out the exemption portion so you can get the biggest paycheck. This is a very serious collection action. If you want your next full check, you need to take care of delinquent filings and information the IRS needs from you to determine a payback plan right away. Get your information together and ” paint a defensible picture” of your financial situation as instructed in this manual. File any delinquent returns, and pay any current payments of estimated taxes that are delinquent (or prove that you are not required to make one by providing your estimated tax calculation). Provide this calculation anyway if your payment is less than it normally should be. Then call for an immediate levy release. Give them the name and the fax number of the person in your company whose job it is to receive wage levy releases. Your social security or retirement can be levied.
Form 668A – Levy
Same as above, except this is a one time bank or financial institution levy. Works on anyone who is holding your money. The funds are on hold for 21 days, then they are sent to the IRS collection person who sent out the levy. I have seen banks not follow the rules on the one time nature of this levy. On the back of the levy it states that this is a one time, not continuous levy. It is for funds on hand the day it is received only. I had a real estate client who had to switch jobs because his employer got a 668A levy on his commissions. None were owed. The following week he had a closing, and would receive commissions. I tried to explain to his employer that the new commissions did not have to be held for the IRS and to read the back of the levy. It’s amazing how some people can be so afraid of the IRS that it clouds their common sense judgment.
Letter 692 – Request For Consideration Of Additional Findings
This comes with proposed adjustments to your tax return. It gives you courses of action. You can sign it, or request an appeal. Be careful, you usually have less than 15 days from your receipt of the letter, to take action.
Letter 1058 – Final Notice Of Intent To Levy And Notice Of Your Rights To A Hearing. Please Respond Immediately.
If you received this notice, it means you owe tax and have ignored Letter 2050. This is one the most serious collection attempt notices the IRS sends to a taxpayer owing tax. It must be responded to or you will lose appeal rights and the IRS will levy anything they can find. As always prepare a preliminary financial statement to know where you stand before contacting the IRS.
Letter 1085 – This Is A 30 Day Letter To Protest An Assessment On A 6020b
This is a 30 day letter to protest an IRS tax assessment on a 6020B, which is the IRS code for a payroll report they filled out and filed for you. Don’t just accept their figures, even if they are close to the actual amounts. Your 941 payroll reports must balance to the 940, the state reports, W-2′s, etc. At a minimum, you must see that the total gross wages for the year is the same for each report. Hire a professional to help you if you can’t do this on your own.
Letter 1153 – Trust Fund Recovery Penalty
The remaining FICA and withholding not collected from the business is now being charged to you. Very serious. Different regions of the country rely on different court rulings to settle some disputes. Basically you must show that you didn’t have authority to direct the company’s funds and that you did not have knowledge of the taxes not being paid. You should send the R.O. your appeal along with your proof that you are not liable, just in case they don’t agree with you. It shows that you are very serious. Many people will wait on this part until it is absolutely necessary. Sometimes R.O.’s will chase everyone who has signature authority on the bank account, any stockholder, any signer of a tax form, or listed officer, and then leave it up to you to defend yourself.
Letter 1389 – 30 Days Protest On Tax Shelter
This gives you 30 days to protest changes made to your return because of your tax shelter activity. Sign it or appeal it.
CP 2000 – We Are Proposing ChangesTo Your Return
If you received this notice, it means that you have omitted income from your return or the amount of income or expenses on your return does not match the amount reported to the IRS. The following pages will provide an explanation of the changes followed by a detailed listing of the items that were left off your return or did not match the amounts reported to the IRS. Respond immediately, with all the proof you have to sway them to your way of thinking. Do not shortcut your proof.
Letter 2050 – Please Call Us About Your Overdue Taxes Or Returns
If you received this notice, it means you owe tax and have ignored previous notices CP-504 or CP-523 or you have delinquent tax returns. You may receive this notice even if you have made arrangements to make installment payments or you have been placed in a “hardship” status. Do not call. Spend time now preparing the delinquent returns, and preparing your financial statements.
Letter 3016 – Preliminary Determination Letter
You have 30 days to appeal, if they turned down your request for innocent spouse relief. Go back and develop your arguments before calling for a new determination. If you can’t get the reviewer to change to your way of thinking, then file your appeal in a timely manner.
Letter 3172 – Notice Of Federal Tax Lien And Right To A Hearing
You now have a real property lien in a particular county only. Just the county listed. Not all counties you own property in. I have had clients that sold all property they had in other counties and used this money to help them negotiate better payment plans. If the lien will cause a hardship, one acceptable to the IRS, then appeal it.
Letter 3174(P) – Notice Of Levy
Similar to letter 1058. Used when a taxpayer changes address. This needs immediate attention. You avoid levies by resolving the collection issues, or you appeal based on a hardship.
Letter 3173 – 3rd Party Contact
This letter advises taxpayers that the IRS may be contacting 3rd parties to ask questions. You can’t really do anything about it. Don’t worry though, your personal information will be kept confidential.
Letter 3219 – Notice Of Deficiency
Issued to a taxpayer before an assessment is made. Usually the result of an audit. If you disagree, you need to file a tax court petition within 90 days. You can file an appeal to contest it. Don’t worry, if you miss the deadline for an appeal you can usually get Appeals to take the case, by filing a tax court petition. Once accepted by the IRS legal division you can call and convince them that this is really a case to be heard by Appeals.
Letter 3228 – Annual Reminder Notice
This is a notice to let you know what taxes and years you owe. This is sent yearly as long as there is an unpaid balance.
Letter 3391 – 30 Day Notification Letter
The IRS says you owe for the years stated. The letter shows you what the liability is based on. Agree to it or protest. However, if you never filed the return, then file it. Use their numbers for income and expense if you feel comfortable with them. If you just want to accept their information without filing a return, ask for a signature form so you can show you signed the return they prepared. They file an SFR (substitute for return) using the 3rd party payer information they have on file. This includes the W-2′s, K-1′s, 1099′s, etc. filed under your tax ID number. Signing a return and having the IRS enter it on their system will start the SOL on collections. I have seen the IRS collect tax liabilities way beyond 10 years because the taxpayer never started the running of the collection statute. The statute starts when the taxpayer files a return that the IRS accepts.
Considering Writing Your Own Letter To The IRS?
If you follow my guide, you will rarely have to write a letter to the IRS, unless you are attempting to remove penalties. If you can’t get someone at the IRS to take care of your requests by a due date, or if you can’t confirm that your request was completed, you may want to send something in writing, certified return receipt, prior to the due date, therefore complying with a statute date that you don’t want to expire.
When in doubt, do a mailing to lock in the due date. Never, however, expect it to be read and acted upon in place of your phone calls! I can tell you to wait 3-6 weeks, but each case will determine the follow up time for each mailing. Other factors will too. For example… How much risk you are willing to take that your paycheck or bank account will be levied?
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