A main focus of my practice is helping small business and individual taxpayers meet their IRS filing requirements. Many taxpayers who come to see me in my Daphne, AL office have received a letter from IRS and are confused as to what actions they need to take to ensure the best possible outcome.
A basic understanding of the collection process can be helpful in knowing when you absolutely must take action in order to prevent a negative consequence.
- Tax Assessed – The IRS assesses a tax due. This can be from filing a return without paying the balance due, from the IRS assessing additional taxes due to missing or incorrect information on your return, or due to the IRS filing a substitute for return for you due to your failure to file a return.
- Billing Notice – A billing notice is sent, and it goes unpaid.
- Silent Lien - a silent lien arises by statute, attaching to all of your assets owned and later acquired.
- Final Notice – A final notice of the IRS’s intent to levy your income and assets is sent. This letter begins a 30-day window for you to request a collection due process hearing. This is a critical point in the collection process, and your last opportunity to stop any enforced collection action and preserve your right to appeal the tax assessment.
- Notice of Federal Tax Lien – The IRS files a Notice of Federal Tax Lien in the public records if you owe more than $10,000, basically destroying your credit score.
- Enforced Collection – Assuming the appeal is not filed, the IRS begins seizing your assets, garnishing your wages, and cleaning out your bank accounts. They will even go after clients who owe you money, directing them to pay the IRS rather than you.
So what should a taxpayer do? The absolute worst thing you can do is stick your head in the sand hoping it will all going away. It won’t. You need to take action once you start receiving these letters.
- Pay up – If you agree with the tax assessment and can pay, do so. Interest and penalties are accruing throughout the collection process. The sooner you pay-up, the better off you will be.
- Contact the IRS – If you agree with the tax assessment but can’t pay, contact the IRS about an installment agreement. If you don’t agree, provide documentation supporting your position to the IRS.
- Retain Professional Representation – If you aren’t comfortable handling the matter on your own, retain the services of a tax professional or an attorney to handle the process for you.
Stellar Accounting & Tax Solutions
811 Daphne Ave, Ste B
Daphne, AL 36526