I GOT A NOTICE FROM THE IRS

What should I do?

The IRS will send a notice or a letter for any number of reasons. It may be about a specific issue on your federal tax return or account, or may tell you about changes to your account, ask you for more information, or request a payment.

You can handle most of this correspondence without calling or visiting an IRS office if you follow the instructions in the document.

Before you proceed, check where the notice came from

The first thing to do is to check the return address to be sure it’s from the Internal Revenue Service and not another agency.

If it's from the IRS, the notice will have instructions on how to respond. If you want more details about your tax account, you can order a transcript.

If it’s from another agency, such as a state tax department, you’ll need to call that office for an explanation.

If the letter is from the Department of the Treasury Bureau of the Fiscal Service, these notices are often sent when the IRS takes (offsets) some or part of your tax refund to cover another, non-IRS debt. The Bureau of the Fiscal Service only facilitates the transfers - it won’t have information about your IRS account or where the money is being sent.

Understanding your Notice

IRS notices and letters are numbered and provide contact information for questions. Both are usually shown in the upper right corner. (If you can't find the number, or have lost your notice, there are general numbers you can call.)

Each notice normally tells you:

• What the IRS is changing on your return or account, or needs more information about
• Why the IRS is making a change or needs that information
• Where to send your reply and by when (if a reply is needed)

There are a few main categories for notices:

Informational notices

Claiming certain tax credits and other interactions with the IRS may lead the IRS to send you a notice. Most of the time, they are just for your records and you don’t need to reply.

Notices about changes to your tax return or account

The IRS may have already made a change, or be looking at your return to see if there was a mistake. The notice will have instructions on if or how you need to reply.

Some common notices of a change:

• An incorrect return, where you made a mistake
• Underreporting income, where it’s possible you didn’t report all your income
• You are being audited or the IRS has already audited you and is proposing changes

Notices where the IRS says you owe taxes

If you have a balance on your tax account, you’ll get a notice letting you know how much you owe, when it’s due, and how to pay.

If you can’t pay the full amount by that date, you need to figure out what payment options might work for your situation, and act to set up a payment plan or other way to pay off your balance.

For specifics on your particular notice, visit Understanding your IRS Notice or Letter on IRS.gov.

What if I want to talk to someone about the notice?

Each notice should include contact information. Some phone numbers on letters or notices are general IRS toll-free numbers, but if a specific employee is working your case, it will show a specific phone number to reach that employee or the department manager.

If you've lost your notice

If you’ve lost your notice, call one of the following toll-free numbers for help:

• Individual taxpayers: 800-829-1040 (TTY/TDD 1-800-829-4059)
• Business taxpayers: 800-829-4933

What if I want to ask for a tax professional’s help to reply to a notice or letter?

You can resolve most notices without help, but you can also get the help of a professional – either the person who prepared your return, or another tax professional.

Tips on how to choose a tax professional

Do you feel that you need help from a tax professional but can’t afford one? You may be eligible for representation from an attorney, CPA, or enrolled agent associated with aLow Income Taxpayer Clinic.

Source website: https://taxpayeradvocate.irs.gov/get-help/letter-from-the-irs

WHAT IF I CAN'T PAY MY TAXES?

If you can’t pay the taxes you owe, the IRS has payment options available. Which option might work for you generally depends on how much you owe and your current financial situation. Each option has different requirements and some have fees.

The most important thing: take action

Most options for paying off a tax debt work best if you are proactive. By taking action as soon as possible, you’ll help ease the burden and keep the IRS from acting to collect the debt. This page will offer some general information and direct you to details. 

If you need to file a tax return, you should. You’ll still owe the taxes, whether or not you file.

You should file your return on time, with or without a payment — the IRS can charge penalties for filing late. The IRS also charges daily interest on unpaid tax bills, so the longer you wait, the more interest you will owe.

First: Figure out how much you think you can pay

You need to consider your entire financial situation. Make a list of your assets and income, and consider other debts you might owe to figure out how much you can pay toward your tax debt.

Before you enter into any kind of payment agreement, be sure you can pay that amount every month, on time.

Second: Choose the payment option that fits your situation

If you can pay the full amount now

You can pay with an electronic funds transfer or with a credit or debit card, or with a check by mailing it to the address listed on your bill or bringing it to your local IRS office.

If you can’t pay the full amount now, but can pay it within 120 days

If you can’t pay in full immediately, the IRS offers additional time (up to 120 days) to pay in full. It’s not a formal payment option, so there’s no application and no fee, but interest and any penalties will continue to accrue until the tax debt is paid in full.

For information on the additional time up to 120 days, call the IRS toll-free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

If you need to make monthly payments to pay off the debt

You can ask for an Installment Agreement, which sets up a fixed monthly payment. This is a formal agreement with the IRS, and involves an application process and some fees.

You won’t be able to pay off the full debt

An Offer in Compromise allows you to pay less than the full amount you owe. 

For the IRS to consider an Offer in Compromise, you must submit an application, and must generally pay certain fees and a portion of the debt. You must then file tax returns and make payments on time for five years after the IRS accepts your offer.

If you can’t make any sort of payment now

The IRS understands there may be times when someone can’t pay a tax debt due to their current financial situation. If the IRS agrees that you can’t pay your taxes and also pay your reasonable living expenses, it may place your account in a status called Currently Not Collectible. The IRS will not seek to collect payment from you while your account is in Currently Not Collectible status, but the debt does not go away, and penalties and interest will continue to grow.

Source website: https://taxpayeradvocate.irs.gov/get-help/i-can-t-pay-my-taxes