Steps To Take if You Receive a Notice of Tax Debt

If the IRS has sent you a written notice of an unpaid tax balance, the steps you take next can impact how severely the situation impacts your finances. The IRS has settlement options for taxpayers who cannot repay their debt in a lump sum. Fully understanding how much you owe, looking for errors in the IRS’s determination, and exploring tax relief options are all wise steps to take after receiving this formal communication. 

Levy & Associates offers help with tax debt notices and can assist you with each of these steps. 

Step 1: Review the Notice Closely

The IRS sends official notices of tax debt via the mail, not through email or over the phone. If you received communications through any method aside from mail, consult a tax professional to determine whether they are legitimate.

Your written tax debt notice should include all of these details:

• The total amount you owe
• The original tax due
• Accrued penalties and interest
• The tax year the debt applies to
• Instructions for how to pay the debt or dispute the balance

Start by reviewing your notice closely and ensuring that you understand what the IRS is requesting from you. Also, assess how the tax debt occurred; did you make an error on your tax return, fail to pay taxes from previous years, or underreport your income? This can help you avoid the same error in the future. 

If the IRS has sent you previous notices that you have not responded to, you might receive more serious notices discussing significant penalties, such as a Notice of Intent to Levy. Take these notices seriously and consult a tax attorney to determine how to proceed. 

Step 2: Assess Your Ability To Pay the Debt

The most straightforward way to respond to a tax debt notice is by paying your balance and moving on. However, this might not be doable, depending on your financial situation. 

Take a closer look at your finances and determine the feasibility of paying your tax bill in a lump sum. If doing so would put you in financial hardship, you may have options for settling the debt with the IRS. 

Now is also a good time to compare the information in the notice to your own financial records and ensure that the notice is accurate. The IRS can make mistakes, and if your tax bill is incorrect, you have options for resolving it. 

Step 3: Consider Appealing the Determination if You Disagree

Another way an attorney can help with tax debt notices is by appealing IRS determinations you disagree with. If you have found an error in your notice or believe the IRS’s assessment of your tax debt is incorrect, an attorney can walk you through the appeals process. The IRS offers a few options for appealing, some of which involve a formal hearing. 

Step 4: Explore Your Options for Tax Debt Relief

If you have determined that the IRS’s calculations are accurate but you cannot pay the bill in one payment, you can explore settlement options to attempt to relieve some of the burden of this debt. IRS tax debt resolution programs include:

• Offers in compromise, which seek to settle the tax bill for a lesser amount
• Penalty abatement, which relieves penalties for certain first-time IRS issues
• Installment agreements, which are payment plan agreements to resolve the tax bill over several months
• Currently Not Collectible (CNC) status for those facing financial hardship

Consult an Experienced Tax Attorney for Help With Tax Debt Notices

At Levy & Associates, we help clients understand their rights and options after receiving an IRS collection notice. For help with tax debt notices, call 800-829-5389 or fill out our contact form.