Killing Trees: The “Impact” Of IRS Notices

Killing Trees: The “Impact” Of IRS NoticesThe Irony Of The IRS And The Paperwork Reduction Act

In 1998, the IRS introduced the Paperwork Reduction Act, a rather ironic name considering the sheer volume of paper notices they generate. Why is it so ironic? Let’s consider this scenario: A client of mine has eight years of tax liabilities, which translates to four quarters of withholding for each of those years. We have an installment agreement in place, and if they happen to miss a single payment, we’re inundated with four certified notices for each of the eight years of liability. What’s more, these notices are sent not only to me and my firm but also to the client. The result? A multitude of paper notifications, all essentially saying the same thing – “You missed a payment.” This inefficiency is why I playfully refer to it as “killing trees.” The Paperwork Reduction Act, in practice, seems far from its intended purpose, as the volume of notices sent out vastly overshadows their actual relevance to a case.

Sometimes, these notices are nothing more than a scare tactic, designed to prompt a response. To address this, I at one point added a humorous touch to my email signature, featuring a small green leaf and the message, “Thank you for receiving my email. Please print and burn immediately as per the Paperwork Production Act of 1998.” Surprisingly, it went unnoticed for five years until one attorney finally appreciated the jab.

Common Reasons Businesses Receive IRS Notices

The reasons behind businesses receiving IRS notices can vary significantly. These notices often fall into two categories: those intended to intimidate or evoke fear and those that hold genuine negotiation implications. The former category includes what we often call “glorified balance due notices,” which assert that a significant amount is owed and immediate payment is required, sometimes with the threat of a notice of intent to levy. These notices typically arrive in green envelopes, designed to catch your attention.

However, it’s really the seemingly innocuous notices that demand the most attention. They may arrive in plain envelopes, subtly labeled “final notice,” but they carry a much more significant impact on the negotiation process. The IRS has a method to their madness when it comes to collections. They employ an aggressive approach initially to grab your attention, but once they progress through the notice phase and can proceed with collections, they become less vocal and less concerned with notices. This shift demands vigilance on the recipient’s part to navigate the IRS’s ever-changing timeline.

The Myriad Of IRS Notices For Businesses

The IRS issues a multitude of notice types, each identified by a distinct code, such as CP 90, LT 11, or CP 523. Each of these codes can indicate either audit assessments, balance due notices, and various other forms of communication. But while tax professionals may be familiar with these designations, our clients generally are not. Surprisingly, even the IRS occasionally struggles to identify its own notices, requiring clarification during phone calls.

As I’ve encountered firsthand, the IRS’s recent influx of new employees has sometimes resulted in training that’s outright lacking. During one phone call, I had to fax the notice to the person on the other end – even indicating where to find the most basic information – to prevent a proposed assessment of over a million dollars. It’s astonishing how someone’s inability to perform a simple task, such as clicking a button on a computer, can have such a significant impact.

Of course, that’s why so many people choose to work with a lawyer on these matters. The role of a tax attorney often entails identifying issues, devising solutions, and communicating effectively with the IRS to rectify the situation. This means that if the IRS representative lacks knowledge, you’re not stuck in a position where you can’t find a resolution for your case. Instead, your attorney will work to determine the appropriate steps to resolve the matter – even if that means guiding the IRS through it themselves.

Responding To IRS Notices: Timelines And Complexities

IRS notices typically assert that you must respond within 30 days of the notice date, but this can vary significantly depending on the notice type. For example, some notices afford a mere 15-day response window, while others suggest 60 or 90 days. What’s more, the advertised response time can actually be misleading, often serving as a mere suggestion. But that doesn’t mean that you should procrastinate, waiting around for the issue to resolve itself. Failing to act promptly can result in missed opportunities, such as missing the statute of limitations for refund claims.

The reality is that navigating these timelines demands an in-depth understanding of IRS procedures – because the IRS deliberately crafts a complex web, sometimes causing taxpayers to surrender or make errors that lead to the collection process. As such, reading the full notice is crucial, and if it seems perplexing, seeking guidance from a professional who comprehends the intricacies of the tax code and IRS processes is definitely in your best interest.

Options For Businesses Disputing IRS Notices

Businesses have various options when disputing the information or claims presented in IRS notices. While some cases may seem hopeless, avenues for resolution do exist. Appeals, advocate requests, and multiple layers of appeals are available.

In many instances, the IRS will issue penalties, sometimes even substantial ones, due to seemingly trivial issues. For example, if the IRS fails to receive a company’s W2 forms that were correctly filed with the Social Security Administration, they may impose significant penalties. A certified public accountant (CPA) might include the missing W2s with a letter and send them to the IRS, but these forms may languish for years before being processed. Meanwhile, the company accrues substantial tax liens, assessments or penalties that should never have been assessed. Navigating these negotiations requires a strategic approach, ensuring that the correct paperwork reaches the right hands.

Fortunately, situations like these are exactly where firms like ours step in. At Complex Tax Law Firm, we play a crucial role in helping businesses understand and respond effectively to IRS notices and letters. In fact, sometimes just knowing how to address an issue is more critical than being “right” in the eyes of the IRS. Merely insisting that you’re right without navigating the bureaucratic process correctly can lead to frustration. In the worst cases, it can cause people to settle for a situation that doesn’t reflect their rights or best interests. Our goal is to prevent you from reaching this point.

For example, consider this situation: A client approached us with a staggering $600,000 in tax liability stemming from a case he had actually won against the IRS in tax court. Unfortunately, his prior attorney failed to file a critical document, resulting in personal assessments and the threat of potential actions against him and his wife. Meanwhile, his CPA and previous attorney had sent countless letters to the wrong IRS processing unit, accomplishing little. Within a month, we realized that their argument was strong but directed at the wrong place. We needed to engage the right individuals and follow a different path. It took nearly a decade, but we successfully resolved the issue, reducing his payment from $600,000 to a mere $6,000. Of course, this outcome could have been avoided entirely if he had sought our assistance a decade earlier.

In summary, reaching out to our firm before problems escalate can save substantial time, effort, and stress. However, if a business finds itself entangled with the IRS, frustrated by the lack of progress, or feels mistreated, involving us at any point can provide a fresh perspective and a strategic approach to resolve the situation. Whether preventing issues or addressing existing ones, we are here to guide businesses through the labyrinth of IRS complexities.

For more information on Receiving A Notice From The IRS, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (303) 720-6573 today.