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- February 24, 2021
Have you received an IRS notice? While it’s normal to panic, try not to stress. Instead, focus on what you can do to manage your unpaid taxes and get back on track.
That’s right – you can get back on track because you have options even if it doesn’t seem that way. Below, we explain how IRS notices work and the types of IRS letters you might receive. We’ll show you how to handle IRS letters – even IRS final notices – with confidence.
Do you need help managing unpaid taxes? Don’t face tax debt or IRS demands alone. Contact Innovative Tax Relief for a free consultation. Discover how we can help you take control of your financial future.
What Is an IRS Notice?
You might be wondering, “why would the IRS send me a letter?” The answer is simple.
The IRS sends a notice when they think you either owe them taxes or they have a question about your return. Sometimes, you’ll also receive an IRS letter if you have a balance due. So, in other words, you’ll receive an IRS notice if the IRS needs to discuss your tax return with you.
There are various types of IRS letters. IRS notice codes and descriptions can help you identify which letter you have received. Common IRS notices include:
- Notice of Deficiency
- Notice of Intent
- Notice of Default
- Notice of Garnishment
Can you view IRS notices online? Yes. You will see that each letter has different possible penalties and interest. They also have very different consequences. Below, we explain how these certified letters from the IRS work.
What Is a Notice of Deficiency?
A Notice of Deficiency is a letter sent by the IRS if they suspect that someone has underpaid tax. It’s also known as a 90-day letter, letter 531, SNOD, CP3219A or Statutory Notice of Deficiency.
When might the IRS send a Notice of Deficiency? It usually arrives 6 months after the filing date.
- You can appeal to the U.S. Tax Court 90 if you disagree with the IRS notice. You have 90 days from receiving the Notice to appeal.
- The IRS Office of Appeals will review your case. It’s often possible to negotiate with the IRS and avoid court.
If you suspect you received a letter in error, you can liaise with your local Taxpayer Advocate Service. But the best thing to do is to contact professional tax experts to help.
How to Respond to an IRS Notice of Deficiency
First, act quickly because you only have 90 days to appeal. After the 90-day deadline has passed, you won’t be getting any extensions. Remember that during this 90-day period, the IRS can NOT collect your taxes.
Now, if you must appeal an IRS decision, do consider filing a petition with the Tax Court. Otherwise, the IRS will send you a bill and charge you the taxes.
Truth be told, it is quite likely for taxpayers receiving a Notice of Deficiency to miss the 90-day window or fail to make any kind of arrangements with the IRS. This always results in the IRS initiating their collection procedure through tax levies, tax liens, and other tools.
For that reason, we firmly recommend contacting Innovative Tax Relief and requesting a free tax consultation for help, advice, and protection. You may have options to reduce Notice of Deficiency-related penalties or even remove them in their entirety.
What Is an IRS Notice of Intent?
The IRS will send you a Notice of Intent when you have not paid a balance. This type of letter informs you that the IRS will start the process to collect to satisfy your tax liability. This letter may also represent the IRS’s intent to seize your property (levy) if you don’t pay or set up a payment arrangement.
Most of the time, a Notice of Intent is sent when you have missed at least three payments in a row or failed to file on time. This is why it is critical that you stay current with filling your taxes.
What if the IRS believes you have breached an agreement with them? Well, they could start the Collections process against you. A Notice of Intent serves as a warning about this process.
- Breaching an IRS agreement could lead to wage garnishment.
- Despite starting Collections against you, the IRS may continue accepting your payments.
When taxpayers receive a Notice of Intent, they usually panic. However, consider a Notice of Intent a firm warning. It’s the step before the IRS acts against you. That’s why it’s crucial to act fast before the Collections process begins.
Beware, though, at this point, as there are two different types of Notices, the (1) Notice of Intent to Levy and the (2) Final Notice of Intent to Levy.
The second one is the last notice the IRS will send you before they seize your assets. It’s the IRS letter that gives them the legal right to seize your property.
This means that you have very little time before the Internal Revenue Services can levy your bank account. On some rare occasions, the IRS will only issue a Final Notice of Intent to Levy.
If you find yourself in this situation, seek professional assistance immediately because a levy is about to happen.
Responding to an IRS Notice of Intent
First, know your rights. The IRS is obliged by law to give taxpayers proper written notice before they do anything with your bank account (i.e., levy the account), per the Internal Revenue Code Section 6330.
That notice must include details about your right to appeal the imminent collection action within a month’s time (30 days). In most cases, the Notice of Intent and the Final Notice of Intent are around 4-5 months apart, which means you have more than 4 months to prepare for the Final Notice of Intent.
Nevertheless, if you receive any of these letters, please have a tax professional handle your case. We have seen too many taxpayers disclosing information that hurt them (or not disclosing the right details). So, their attempt to manage their own case backfired.
What Is a Notice of Default?
A Notice of Default (aka Notice of Demand or CP523) is sent when you default on an IRS agreement. Typically, you’ll receive this notice of you miss at least 3 payments. You might also receive it if you didn’t file on time after setting up a payment plan.
When you have reached the point of defaulting payments and receiving a Notice of Default, the IRS stops accepting your payments. Even worse, they could continue accepting your payment and, at the same time, send you into Collections AND garnish your wages because you broke the agreement. It should also be noted that the IRS may terminate your installment agreement without letting you know first if the Secretary (or an authorized representative) considers the collection of the due tax is in jeopardy.
Responding to an IRS Notice of Default
Respond to it within 90 days of receiving the notice so the IRS does not file a federal tax lien (or a levy) that will enable them to seize your assets. So, ensure you (or your tax professional) contact the IRS to reinstate your payment plan.
It is also paramount that you make a payment before the payment deadline or termination date listed on the Notice of Default. If you do this, then you might be able to get your installment plan back in good standing again.
You may need to provide some information about your assets, though, in this case or even be asked to fill out a new Installment Agreement (Form 433-D).
You should also contact the IRS if you believe that they have terminated your payment agreement by mistake or if you disagree with the due amount. You will find all contact details in the letter.
What Is a Notice of Garnishment?
A Notice of Garnishment is one of the most serious delinquent tax notices you can get.
Unlike other creditors, the IRS can garnish your wages without getting a court judgment. This means that you could lose vital income without warning.
Fortunately, the IRS provides several different options for you to repay your tax liability and skip the unwanted wage garnishment process.
When it comes to the max sum creditors (judgment creditors and others) can take from your wages, these are defined by federal and state laws. However, the tax code enables the IRS to take as much as it can and leave you with the necessary amount you need (per the tax code) to pay for your basic living essentials.
As for the sum you can keep (protected wage), it is directly related to the number of exemptions you claim for tax purposes. For instance, a married individual filing jointly (paid monthly) that claims two exemptions can keep $1,625. A single individual claiming five exemptions (gets paid weekly) is allowed to keep slightly less than $480. the IRS garnishes anything above these sums.
How to Deal with an IRS Notice of Garnishment
Since the IRS sends out several notices before garnishing your wages, once garnishment begins your options are limited. You do still have options though, including:
- Pay the unpaid taxes
- Show that garnishment will cause undue financial hardship
- Seek an Offer in Compromise or other payment plan
Your employer cannot get your wages back. They are bound to comply with IRS orders. So, if you receive an IRS Notice of Garnishment, your only choice is to negotiate with the IRS.
You can either pay off the tax liability, prove to the IRS that the garnishment is creating a financial hardship for you and attempt to get it reduced, or file an Offer in Compromise.
Also, don’t think that quitting your current job and getting a new one will save you from having your wage garnished. The court order follows you wherever you go, including your new position.
Finally, disputing the Notice of Garnishment won’t get you anywhere if you truly owe the tax liability. You will only waste money and time that you could spend elsewhere (i.e., to reduce or get rid of your liability).
Get Help with IRS Notices Today
The IRS sends out notices to millions of Americans each year.
And despite how challenging the situation might feel right now, there is a way out of tax debt for everyone! If you’re facing an IRS final notice or letter, call us for a free consultation. Our team will explain your options and help you decide how to manage your tax debt.
Don’t let an IRS letter overwhelm you. Contact Innovative Tax Relief now and get your finances back on track.
