Taxation & Estate Planning

Who?s afraid of an IRS letter? 5 reasons not to be.

By howardlevy

A funny thing happened to me on the way to my mailbox today.  There was a letter from the IRS.  Sure, I get plenty of IRS mail everyday – I am an IRS defense attorney.   But this one had my name on it.

I put myself in my clients’ shoes.  I understood their fears.

Deep down, I knew what it was.  But there was still an intimidating factor to an IRS letter.  Whatever was inside was not going to go away, and I thought through all the reasons to open it, not ignore it.

1.     Ignoring it does not make it go away.  While you are pretending it does not exist, the IRS is doing the exact opposite.  And claim your certified mail – if the IRS has the right address, failure to go pick it up is not a defense to what was inside.  What you don’t know can hurt you.

2.     You can lose your wages or bank accounts if you ignore IRS letters. Before the IRS can take your property, they must send you a Final Notice of Intent to Levy.  Ignore it, and the IRS can come after your assets.  Respond to it, and you have the right to stop IRS collection action and meet with an IRS appeals officer to resolve your case.

3.     If you are a nonfiler, the IRS could be inquiring about it.  If you do not respond, the IRS can file an estimated return against you.  This will overstate the amount you owe and the amount the IRS tries to collect. The IRS could owe you money, but if you wait too long to claim it and file your return, the IRS will not pay it to you.

4.     The IRS could be auditing your tax return.  If you do not respond, the IRS will find you owe them money, even if you don’t.  IRS collection letters will follow.  That makes it complicated – stopping the IRS collection machine while reopening an audit.

5.     Interest and penalties makes the amount you owe go up.  The longer you put it off and ignore the IRS, the deeper it gets.  The original amount you owe will double every five years.

Know that the IRS is often wrong.  You have defenses, and there are solutions. The earlier a plan is put in place, the sooner you can move on with life.

Oh, my IRS letter contained a password to use in accessing IRS transcripts for my clients.  It would have only hurt those around me to ignore it.

Full post as published by IRS and the Law on October 06, 2009 (boomark / email).