The Internal Revenue Service communicates in two ways: in person via Revenue Officers, or through the mail. They will rarely ever call your phone. IRS notifications can be a challenge to understand, but the three most common and urgent IRS letters stand out. They are a Notice of Deficiency, a Final Notice of Intent to Levy, and a Trust Fund Recovery Penalty Assessment. These are three that should grab your attention.
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What is a Notice of Deficiency?
A Notice of Deficiency is an IRS letter that lets the responsible party know what is owed and that the IRS intends to collect. It is also known as a 90-day letter or statutory notice of deficiency.
The notice of deficiency will list the tax year and amounts owed. It will also provide the date the deficiency is due and what remedies a taxpayer may have. This notice is not final. There will be more to come.
As proposed by its alternate name, the notice gives you 90 days to dispute the amount owed. If you do not respond, the IRS will continue with more aggressive collection activity.
Final Notice of Intent to Levy
The IRS is legally not allowed to seize your property or levy your finances without notifying you. The Final Notice of Intent to Levy is your warning that the IRS is looking to collect. This notice will typically be a LT11 or 1056 Notice. It will also clearly state you have a right to appeal.
Even if this notice never gets to you, it is considered notification as the IRS is not required to “find” you in order to proceed with collections.
Once you receive the letter — if you receive it — you have 30 days to respond. After 30 days the IRS can levy your bank accounts, garnish your wages, freeze assets and garnish your Social Security, among other things. This means the IRS can legally take ownership of money in your bank or other financial account, seize and sell your vehicle(s), real estate, and other personal property to satisfy tax debt. Typically, they will freeze the money in your bank account or garnish your wages.
If you are going to hire someone to assist you, this is the time! If you are assisted by a professional who is knowledgeable in tax settlements the should be able to stop levies and garnishment before it happens. Additionally, having a Licensed Enrolled Agent on your side increases your chances of a successful resolution to your tax liability and seizure release.
For more information about what happens to your property once the IRS seizes it, head to the IRS website.
Trust Fund Recovery Penalty
Also known as IRS Letter 1153, a Trust Fund Penalty notifies the receiver that the IRS is planning to make an assessment against the responsible party for not paying payroll withholding taxes. The business or employer is supposed to collect, hold in trust, and pay to the IRS FICA taxes, including Social Security and Medicare. If you owe Trust Fund Recovery Penalties you will automatically be assigned a Revenue Officer, and a Revenue Officer can come to your business or home.
The IRS then issues Letter 1153 to the responsible party. The responsible person includes an officer, employee of a corporation, a member or employee of a partnership, a bookkeeper, a spouse or any number of person’s who the IRS can deem responsible for paying over payroll taxes. So, the TFRP can be assessed against people not even involved in the Payroll tax process.
When a responsible party does not pay payroll taxes it is a civil and criminal offense. The IRS is serious about collecting payroll taxes and this is not the time to be complacent. I recommend if you don’t have the ability to immediately pay the TRFP that you hire someone to help you with this process.
Why These Letters Are Important
Receiving a letter from the IRS may be a shock to your system, but they’re meant to influence you to take action. The letter is a notice that the IRS plans to take action and now is the time to remedy your tax issue. You can appeal IRS action but often this only serves to delay collection. If you owe the money, you are much better off to negotiate, and/or settle.
The tax code places restrictions on the IRS. It is essential to know your rights, and how to respond. If you receive a letter from the IRS, don’t panic. Instead, seek competent guidance.
Dealing with the IRS on your own is often not a good idea. We specialize in helping taxpayer’s with their IRS issues. Unless you have a simple issue it is not a good idea to ‘cheap’ it out now. It can cost you a lot more in the long run.
We can save you time, money and frustration. Let them help you get back on your feet and take control of your finances. Give us a call today for a free consultation.