Before we get too deep into what you should do if the IRS contacts you, let’s discuss the frequent use of phishing emails and telephone scams to trick people into believing they owe money to the IRS. If your initial contact with the IRS consisted of a threatening phone call demanding immediate payment you were likely the target of a telephone scam.
The IRS has come out and publicly stated on numerous occasions that they will never:
- First contact a taxpayer by email requesting personal or financial information
- Ask for PINs, passwords, account numbers or any other confidential financial information
- Request credit numbers or wire transfers over the phone
- Threaten driver license revocation, deportation or arrest unless payment is immediately received
If you’ve received a letter with a CP14 in the top right corner from the IRS, then you should actually be concerned.1
What Are These IRS Letters?1
The CP letters are sent out to taxpayers who the IRS has determined owes them money. You will receive a series of four letters, with a fifth and final letter, the “1058,” or Notice of Intent to Levy.
The first three letters, CP14, CP501 and CP503, will just inform and remind you that you owe the IRS money. The fourth letter, CP504, will notify you of the IRS’s intent to seize your property.
That final 1058 will notify you that the IRS will begin levying your bank accounts, wages and other property. This 1058 letter is the really important one, because the IRS can’t legally begin garnishing your wages or taking your property without you first receiving this letter.
The 1058 does give you an out, namely that you have 30 days to request a “Collection Due Process Hearing (CDP).” This will put a halt to any IRS collection efforts.
What Can an Attorney Do to Help?
Dealing with the complex bureaucracy of the IRS can be exceedingly difficult for people unfamiliar with the process. There are often questions of how much information to give, what’s relevant to their inquiry and which hoops you have to jump through to get the process to stop so you can have some breathing room.
You may have a CPA already, but there are two important things to consider in this regard. First, your CPA may have been derelict in their duties which resulted in this mess to begin with. Second, you don’t get attorney-client privilege with a CPA. That means your CPA could be forced to testify against you to the IRS should the process get that far.
Also keep in mind that tax attorneys do this for a living. With a complex set of federal tax laws that seem to be constantly in flux, their expertise may prove to be invaluable in your case.
The generally accepted perception of the IRS is one of an ill-spirited juggernaut out for your money, but there are in fact an array of programs designed to assist people who have gotten in over their heads for whatever reason. Tax attorneys may be able to help you make use of these programs, potentially even reducing the total taxes owed.
They also know how to negotiate with the IRS, which is commonly one of the biggest benefits of hiring a tax attorney. The IRS, like any collections agency, knows getting something is better than nothing. It is not at all uncommon for the IRS to settle with tax debtors and accept an offer in compromise, which could potentially be significantly less than the initial tax liability.
In order for the IRS to accept an offer in compromise you need to prove that:
- It’s not feasible for you to pay your tax debt,
- The liability the IRS claims is legitimately questionable, or
- The total tax liability would subject you to unfair economic hardship, similar to the threshold for filing for bankruptcy.
Dealing with the IRS is unsettling to say the least, but having an experienced tax attorney on your side may go a long way in alleviating at least a portion of your stress. If you would like to talk to an experienced local Fargo tax attorney, contact Baird Law today.