The Internal Revenue Service will be closed on the following days: May 24, June 14, July 4, July 22, and Aug. 30. This will include the shutdown of all toll-free hotlines, the taxpayer advocate service and nearly 400 of the agency's taxpayer assistance centers nationwide. These closures mean that if you are working to resolve problems with the IRS, keep these dates in mind when submitting paperwork. No tax returns will be processed and compliance-related activities will not take place. The IRS will not be able to acknowledge receipt of any e-filed returns on any of these furlough dates.
Timeliness plays a major factor when working with the IRS. Each letter you receive has a timeframe in which to respond. Just like the scheduled tax return filing date, the IRS requires responses to correspondence to be complied with as instructed.
The most frequent type of audit or exam is a correspondence audit. This involves the IRS sending an initial contact letter stating there was a discrepancy with the tax return. Usually the tax return does not include amounts that the IRS has received from third parties. For example, W2 or 1099 information for that second job, information from the sale of stock or a cancellation of debt notice. You will have 30 days to respond to this letter. If the taxpayer does not respond, the IRS issues a 30-day letter and audit report with proposed changes to the tax return. If the taxpayer does not respond to this letter, the IRS will issue a 90-day statutory notice of deficiency. Letters from the IRS are usually sent in the regular mail, except the 90-day statutory notice of deficiency, this letter will come certified.
Once a tax has been assessed and there is a balance due, the IRS will begin the collection process of the debt. The IRS will issue a "request for payment," which informs the taxpayer that there is a balance due on the return, states the amount of tax, interest and penalties and request payment within 10 days. This initial notice statutorily gives the IRS authority to create a valid federal tax lien. If the amount due is relatively small, the taxpayer will normally receive four subsequent notices before the IRS proceeds to take administrative collection measures. If the liability is not paid, the taxpayer will receive a "reminder" notice, then an "urgent, immediate action required" notice, an "urgent, we intend to levy" notice and then a "final notice, notice of intent to levy."
The IRS has the power to collect taxes by levying a taxpayers' property as a result of a federal tax lien. Therefore, once the initial notice is given to the taxpayer, the IRS can file a federal tax lien in the county in which the taxpayer lives. The requirements for establishing a lien are contained in the IRS code. Once an assessment has been made, notices and demands for payments are sent and the taxpayer has neglected or refused to pay, a lien is made and a levy can be executed against the taxpayer's assets.
My advice in dealing with the IRS is to acquire the assistance of a tax professional such as an enrolled agent, CPA or tax attorney. Someone who understands the processes of the IRS can more effectively advocate for the taxpayer. Understanding the timeframes and the severity of the notices is a step in the right direction. However, understanding the processes needed to resolve the issue with the IRS is where many taxpayers fail and end up having their wages or bank accounts levied. It isn't pleasant dealing with the IRS when you have a balance due. Acquiring the assistance of those who know the processes can eliminate many headaches for the taxpayer.
Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at firstname.lastname@example.org.