I Received a Letter from the IRS?! What Now?
Receiving a letter from the Internal Revenue Service (IRS) can be a stress-inducing event.
What should you do?
As with most problems, the best way to handle the IRS letters is to begin dealing with them earlier rather than later. Open the letter. If the letter does not make sense to you, or if you’re not sure what the best response is, we at Deprez Tax Law can help you with a forward-looking plan and solution. Our approach reduces your stress by having a competent professional on your side to handle the relevant tax issues and bring them to a reasonable resolution.
The following are some considerations when it comes to resolving tax issues, especially with the IRS.
The IRS Letters
Our clients are first notified of a problem wtor to
“A Professional Law Corporation Specializing in U.S.A. and International Tax Matters – Updated
ith their taxes when the IRS sends them a letter. It is important to note that the IRS rarely calls taxpayers. Therefore, the so-called IRS phone calls are usually scams. Letters are the official means of IRS communication to taxpayers.
There are many types of IRS letters. The most common IRS letters contain one of the following:
- The IRS stating that it has information that does not appear on your tax return and assesses unpaid tax, penalties, and interest based on that information.
- The IRS has opened an audit (i.e., examination) of the tax return that you filed.
- The IRS requesting tax returns that have not been filed.
These letters are an attempt by the IRS to engage you to cooperatively determine what the appropriate tax liability is and to have you pay that tax liability. Keep in mind that they want a resolution as much as you do.
Advantages of Responding to the IRS in a Timely Manner and Consequences of Non-Response
The most important thing to remember when you receive a letter from the IRS is to engage with them as soon as possible and start the process of resolving the tax debt. This process is called Tax Resolution.
What you do not want to do is to ignore the IRS letters. If ignored, the IRS will not only keep sending new letters, but also start a variety of processes through which they try and collect the taxes they believe are owed.
The following are the advantages to establishing communication with the IRS quickly and sooner, versus waiting a long period of time:
- More tools available to you for resolving the tax issue.
- Fewer penalties charged to you.
- Less interest charged to you on the tax you owe and the penalties you accrue.
- Less pressure and stress and interruption to your personal and business life.
Conversely, if you wait a long period of time to respond to the IRS, or ignore them completely, the following consequences may occur:
- Additional penalties will likely be charged.
- More interest will be charged on the taxes you owe, and interest on the penalties.
- As a variety of deadlines are missed, some resolution methods such as specific types of appeals and court access become denied.
- Systematic financial pressure is applied by the IRS in an effort to cause you to respond, including using your federal and state income tax refunds towards your IRS tax debt, levying tax liens on your home and other property, garnishing your wages, and levying your bank accounts.
- The IRS may prevent you from obtaining or renewing a passport.
- The tax collections actions by the IRS may also impact your ability to borrow money, sell or refinance property you own, obtain employment, operate your business, obtain or maintain business and professional licenses, and travel.
Should I Handle this Myself, Call My Tax Preparer, or Use Deprez Tax Law?
Upon receiving a letter from the IRS, what comes to mind often is how to resolve it, and should it be resolved by oneself, with one’s tax preparer, or with legal counsel. One important consideration is that a letter from the IRS represents a tax law problem, in other words, a legal problem.
Let us consider the scenario where you may choose to handle the legal problem on your own. For small and inexpensive tax issues, this may be a valid option. If you choose this option, consider the following
- Wait times for the IRS phone lines may be significant. Be sure that you have time during business hours to be on hold for a long period of time.
- Once you do have the IRS on the line, you may be asked for information, forms, and letters with which you have limited experience or understanding.
- You may experience frustration in communicating with the IRS, which may include the IRS not understanding or accepting your argument.
- You may not understand what the IRS is requiring you to do.
- You may not know what to options to request.
- You may not know all the tools and options available to you.
- You may not understand what it takes to resolve the issue even after speaking with them as tax law has a lot of jargon.
Option 2 is that you can go back to your tax return preparer. There are many types of tax preparers with significant variability of training, skills, and competence. Some may not be willing or able to help you. In addition, your IRS issue may be the result of a mistake made by your tax preparer. If the tax return preparer made a mistake, the preparer may be more worried about protecting themselves than solving your tax law problem in a cost-effective manner. In these cases, a different perspective from a different tax professional may be useful.
Deprez Tax Law is a law firm focusing on tax law and has the training and experience to effectively resolve your tax issue. We bring a fresh set of eyes, detailed legal analytical skills, a determined tax law communication ability to get to an appropriate outcome.
At Deprez Tax Law, we systematically address your tax matter in three broad phases.
- We analyze and understand the problem.
- We work the problem through the appropriate IRS procedures and processes.
- We negotiate and set up a most beneficial resolution.
Phase I: Understanding the Problem
The first phase is understanding the problem from both your and IRS’s perspective. This starts by investigating your tax history by collecting information from you and the IRS. The analysis of this information sets up what the correct processes are that should be used to resolve the problem and to identify the outcomes that are feasible for both parties.
Typically, our initial communications with the IRS result in the following outcomes:
- the IRS “pausing” their collection actions;
- Identifying the right IRS processes; and
- Making the initial submissions to the IRS to resolve the tax matter.
Phase II: Working Through the Right IRS Processes
Once your tax problem is analyzed and understood, the next phase is selecting and working through the appropriate programs, procedures, offices, and desks of the IRS to resolve your tax issue.
Minimum tax compliance standards need to be met to resolve tax matters with the IRS. These include filing all recent tax returns and making the required estimated tax payments for the current tax year. If you have not filed the necessary tax returns (often for the last six years), we arrange the necessary returns to be filed.
If there is debate on the underlying tax amount, we defend it on audit or communicate in other manners with the IRS to get the underlying tax amount down to its appropriate level. Success in these processes may also reduce associated penalties and interest.
If the tax liability appropriately belongs to someone else, like an ex-spouse or business partner, we communicate our perspective to the IRS. For example, with an ex-spouse, this may be done via an Innocent Spouse Relief request.
Once we have the tax liability at the correct amount, we may be able mitigate the penalties associated with the tax liability. This may be done by explaining a reasonable cause for the taxpayer’s tax situation.
These extensive and complex processes are handled completely by our tax law firm.
Phase III: Negotiating and Setting up the Appropriate Resolution
The last phase of the tax resolution process is determining and paying the agreed to tax debt.
The best outcome for the taxpayer is an IRS determination that either no tax is due or that a refund is due. If a refund is due, this may have to be applied for and Deprez Tax Law can handle that application for you. A refund may not only be of the taxes previously paid, but the IRS may also pay interest associated with the taxes the IRS incorrectly held.
If payment of taxes, penalties, and interest is due, you can either pay the full amount at once or structure the payments to be made over time. The available payment structure depends on the amount and type of tax involved, the age of the taxes, and your income and wealth situation. Within the parameters of the IRS, we help you set up with a payment plan that works for your financial situation. These payment plans, also known as installment agreements, may be as long as 84 months (6 years), if needed.
Other options exist, if your financial situation or other circumstances warrant. For example, the IRS has an Offer-in-Compromise program, were your tax debt may be settled for less than the full amount that is actually owed.
Resolving your tax matter may also involve removing tax liens or stopping tax levies and garnishments.
Conclusion: There is a Solution to Your IRS Tax Problem
In summary, there is a solution to your IRS tax problem. The process starts with a disconcerting letter from the IRS that is meant for you to engage with the IRS and arrive at a resolution. Deprez Tax Law investigates and analyzes the tax problem, identifies the appropriate IRS processes, and engages with the IRS with the needed submissions and negotiations. The goal is a mutually acceptable resolution that allows the IRS to close the relevant tax matter and for you to successfully resolve your tax issue and return to normalcy and prosperity in your life.