On February 9, 2022, the IRS issued News Release IR-2022-31, announcing the suspension of several letters and notices usually sent to taxpayers who owe federal taxes or have not filed a prior year return. The lingering pandemic and subsequent IRS shutdown, budgetary constraints, and lack of employee workforce have caused the IRS to become woefully behind in processing income tax returns and correspondences
Before the February 9 announcement, the IRS continued to issue automated correspondences regarding missing tax payments and unsubmitted returns, even though these missing returns and payments may be waiting to be processed in the stacks of unopened mail. According to their website, the IRS has 7.2 million unprocessed individual returns as of March 4, 2022. Of this figure, 4.2 million represent unprocessed returns for tax years 2021 and prior. As of February 26, 2022, the IRS had 2.1 million amended individual income tax returns (Form 1040-X) to process. In addition to individual income tax returns, the IRS is working through correspondences, audit responses, unprocessed business, and payroll returns, not to mention the current tax season workload. After strong recommendations by Congress, tax professionals, and the National Taxpayer Advocate, the IRS put a temporary suspension on the following individual and business notices.
- CP80, Unfiled Tax Return: Generally issued when the IRS has a payment or other credit on file for a tax year that was not filed.
- CP59 (CP759 in Spanish), Unfiled Return(s), First Notice: Generally issued when the IRS has not received a prior-year tax return.
- CP516 (CP616 in Spanish), Unfiled Return(s), Second Notice: IRS is requesting information regarding a delinquent return.
- CP518 (CP618 in Spanish), Final Notice – Return Delinquency: This is the final reminder letter sent to the taxpayer regarding a delinquent return before other compliance actions occur.
- CP501, Balance Due, First Notice: This letter reminds taxpayers they have a balance due on their account, generally stemming from a return the taxpayer previously filed, the assessment of additional tax resulting from an audit, or tax the IRS assessed on a tax year where the taxpayer never filed a return. The IRS will assess the tax based on information from third parties such as employers, banks, investment institutions, etc.
- CP503, Balance Due, Second Notice: If the IRS does not receive a response from the taxpayer after issuing CP501, the IRS will mail this notice reminding the taxpayer of the balance due.
- CP 504, Final Balance Due Notice -Third Notice, Intent to Levy: Also known as a Notice of Intent to Levy, the taxpayer has thirty days from the date on the notice to contact the IRS to set up a payment plan, pay the entire balance due, or make some other agreeable arrangement. If the IRS does not receive a response within the thirty days, the IRS may begin levy actions against the taxpayer, including garnishing wages and levying bank or investment accounts.
- CP2802C, Withholding Compliance Letter: The IRS sends this letter to taxpayers whose federal income tax withholding on wages may be too low.
- CP259 (CP959 in Spanish), Return Delinquency (for business returns): Generally issued when the IRS has not received a prior year return from the business entity.
- CP518 (CP618 in Spanish), Final Notice – Return Delinquency: This is the final reminder to the business entity that a prior year return has not been filed.
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Taxpayers who received IRS Notice CP504, Notice of Intent to Seize (Levy) Your Property or Rights to Property, before February 9, 2022, may still be subject to collection activity based on the facts and circumstances of their situation and the IRS’s discretion. Those who did not receive IRS Notice CP504 before February 9 and owe back taxes and unfiled tax returns should have a temporary respite from IRS collection activities, including receiving certain notices. However, taxpayers should take care. Suppose the IRS has reason to believe the collection of tax is in jeopardy. In that case, collection activities may occur, such as placing a lien on a taxpayer’s primary residence or levy action on the taxpayer’s wages, bank, or investment accounts.
Currently, there is no set date on when the notice suspension will end. The IRS stated the automated notices above would be suspended until the backlog is resolved. On the backlog, IRS Commissioner Charles Retting stated, “We are working hard, long hours, pushing creative paths forward in an effort to be part of the solution, rather than the problem.”
While most taxpayers will welcome a reprieve from receiving these notices in their mailbox, it does not mean the unpaid balances or unfiled returns disappear. Any penalties and interest assessed on back taxes due (such as the Failure to Pay Penalty) and penalties and associated interest for unfiled returns (such as the Failure to File and Fraudulent Failure to File penalties) continue to accrue. The IRS recommends that taxpayers who agree with the assessed tax due or need to file a prior year return resolve these issues as soon as possible to stop the accrual of penalties and interest.
For most taxpayers, receiving a notice from the IRS brings anxiety, dread, and sometimes a sense of helplessness. Human nature draws us to the path of least resistance, so the thought of putting IRS issues aside for a while can seem inviting, especially when you consider the upheaval of the past couple years. As tempting as it may be to put off what the IRS has temporarily suspended until tomorrow, now is an excellent time to resolve lingering tax issues.
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Sir Isaac Newton’s Third Law famously states, “Whenever one object exerts a force on another object, the second object exerts an equal and opposite on the first.” Or, simply put, for every action, there is an equal and opposite reaction. Waiting until the IRS resumes automated collection actions to address looming tax issues may increase penalties and interest on the balance due. It can also escalate feelings of panic, which is the perfect recipe for making a rash decision that may not be in your best interest. Addressing delinquent tax liabilities and unfiled returns now, before a Notice of Intent to Levy is issued, provides the time to explore your options and address the situation in the best possible manner.
The first step in resolving any tax situation is getting the facts and understanding your options. The qualified tax professionals at TaxAudit’s Tax Debt Relief services have tax relief down to a science. Their four-step method helps taxpayers and businesses get back on track to freedom from tax burdens.
1: Get free, no-obligation answers to your tax debt questions
2: Dive deeper with a comprehensive assessment
3: Execute your personal tax debt relief plan
4: Final settlement and resolution of your tax debt
During Step 1, taxpayers speak with a licensed tax professional to understand their specific situation and the possible options available to resolve their tax debt. Next, for a flat fee of $399, the taxpayer’s tax professional will review their documentation and map out a plan of action based on their specific facts and circumstances, current tax code and procedure, research, and years of experience. The tax professionals on TaxAudit’s Tax Debt Relief team do not work alone. They have the combined experience of over 140 tax professionals behind them.
During Step 3, the tax professional will intercede on the taxpayer’s behalf and represent them through all negotiations and processes with the IRS or state tax authorities. They will keep the taxpayer informed and provide updates on any discussions or other correspondence with the tax agency. Working diligently, they will bring the case to the best possible resolution as quickly as possible. In this video, our Director of Tax Services, Arnold van Dyk, Esq., explains TaxAudit’s proven approach to tax debt relief.
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The professionals at TaxAudit’s Tax Debt Relief services understand the various payment plans available and assist taxpayers with setting up a monthly payment plan they can afford. It is not unusual for taxpayers to set up a payment plan they ultimately cannot afford, which can put the taxpayer in default with the taxing agency and ultimately in a position where they may be subject to a lien on their home or wage garnishment. With the rate of inflation rising and the price of gas, food, and other essentials at an all-time high, taxpayers may be in a position where they currently cannot afford a payment plan. Tax Debt Relief professionals can guide taxpayers through requesting “Currently Not Collectible” or CNC Status, which places a temporary collection activity hold on the taxpayer’s account. Once a taxpayer’s account is approved for Currently Not Collectible Status, the IRS will temporarily suspend any payment obligations and further collection activities. Any levy actions, such as wage garnishment, will be released. The first step when requesting CNC status is completing and submitting a Collection Information Statement, which provides the IRS information about the taxpayer’s income, assets, and expenses. With this information, the IRS determines if a financial hardship prevents the taxpayer from making payments towards their tax liability. It is essential to understand that the living expenses the IRS considers when determining if a taxpayer can afford to make monthly payments are limited. What a taxpayer might consider a necessary expense may be considered unallowable to the IRS. The professionals at Tax Debt Relief understand the complexities surrounding IRS financial assessments and assist taxpayers in determining if their financial situation qualifies for economic hardship status.
In addition to payment plans, our tax professionals offer tax debt relief solutions surrounding:
- Audit Reconsideration
- Innocent Spouse Relief
- Offers in Compromise
- Penalty Abatement
- Revenue Officer Case Representation
- Wage Garnishment Relief
- Tax Levy Relief
- Tax Lien Relief
- Business Back Taxes including late or skipped payroll tax payments, unfiled tax returns, and business closure when taxes are still owed
TaxAudit has tax relief services down to a science with their 4-step approach to tax debt relief. Despite the current IRS moratorium on automated collection proceedings, taking the steps now to settle delinquent tax liabilities can bring the kind of relief only the freedom from tax burdens can bring.
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