The Internal Revenue Service send notices to taxpayers in many situations after filing a tax return or when they did not file. Unfortunately, many taxpayers ignore the notices resulting in some severe consequences.

Taxpayers must answer to correspondence from the Internal Revenue Service when an action is required. Do not dismiss any letter. Generally, taxpayers have 30 days to answer to an IRS correspondence.

The Internal Revenue Service has special procedures in place for the so called “Non Filers”. When taxpayers failed to reply to the IRS requests to file a return, the IRS could contact neighbors, employers and others to gather information on taxpayers’ potential tax liability. The IRS also received the Forms 1090s, W2s, and others issued to taxpayers.

The IRS has authority under the law to prepare a substitute tax return known as Substitute for Returns (SFRs) on taxpayers’ behalf when they did not file. In this case, taxpayers lost any deduction and credit that they may be entitled to. 

The statute of limitations rules does not exist in cases of 1) taxpayers failure to file a return and 2) assessment and collection of taxes on SFRs.

When taxpayers continue to not file a return and do not respond to IRS requests for a return, there are a variety of enforcement actions that the IRS could take, including penalties and criminal prosecution. Generally, after the fourth notice is ignored, the IRS would take actions. Taxpayers could always make arrangements with the IRS to avoid criminal prosecution.

Taxpayers could still file their tax return and claim the deductions and credits even after the Internal Revenue Service had already prepared a substitute return on their behalf.

An installment agreement is a good option to resolve a tax debt.

Installment Agreement

Taxpayers are eligible for a guaranteed installment agreement if the tax owed is not more than $10,000 and:

  • During the past 5 tax years, you (and your spouse if filing a joint return) have timely filed all income tax returns and paid any income tax due, and have not entered into an installment agreement for the payment of income tax;
  • You agree to pay the full amount you owe within 3 years and to comply with the tax laws while the agreement is in effect; and
  • You are financially unable to pay the liability in full when due. 

Form 9465 is used by taxpayers to request a monthly installment plan if they cannot pay the full amount of tax they owe. Taxpayers may be able to avoid filing Form 9465 if they owe $50,000 or less. Taxpayers could establish an installment agreement online, even if they have not yet received a tax bill. The fee charged for the installment agreement is less when taxpayers apply online.

The IRS has made changes to its criteria for streamlined installment agreement processing permanent as of September 26, 2018. More taxpayers are now qualified to have their installment agreement request processed because of the enhanced criteria.

Businesses who currently have employees can qualify for an In-Business Trust Fund Express Installment Agreement (IBTF-Express IA). As part of the application process, these installment agreements generally do not require a financial statement or financial verification.

Taxpayers could qualify for an installment agreement if:

  • They owe income tax on Form 1040 or 1040-SR,
  • They may be responsible for a Trust Fund Recovery Penalty,
  • They owe employment taxes (for example, as reported on Forms 941, 943, or 940) related to a sole proprietor business that is no longer in operation,
  • They owe an individual shared responsibility payment under the Affordable Care Act (this payment won’t be assessed for months beginning after December 31, 2018).

Under current law, enacted in 2015, a taxpayer might not be able to obtain a passport or travel when he or she owes over $50,000 to the IRS because this is information could be reported to the Department of State.

NEVER ignore a tax due notice, regardless of your financial situation. Seek the guidance of a tax professional who is qualified to represent you before the IRS.

  You could reduce your tax liability by proper tax planning strategy as individual or business owner?

We offer FREE initial consultation!!!

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