If you’ve received a collections letter from the IRS, you may be wondering if you should respond. As you might expect, the answer to your question is yes and no. Do keep in mind that letters from the IRS should never be ignored. It’s important to open your mail and find out what they want.
Ignoring the IRS is asking for trouble
The IRS sends notices for a reason. If it’s your first collection letter, it’s likely that you failed to pay the assessed taxes by the deadline. This starts the collection process and triggers a letter with your unpaid balance, which is due immediately.
One may hope to delay the process or assume it’s a mistake but ignoring the letter is always going to make the situation worse. If there is a mistake in the taxes assessed, it won’t be corrected unless you dispute it with the IRS and adequately prove that you don’t actually owe the amount. In the meantime, penalties will continue to accumulate and interest will accrue on the balance, compounded daily. By the time it’s resolved, you could owe far more than you do at the outset.
There’s also the matter of the IRS’s power to collect a tax debt. If you ignore their early attempts to collect a debt, they can escalate the matter in other ways. The IRS has the power to garnish your wages, seize bank accounts, and repossess assets in order to settle your back tax debt. They can also turn over collections to a third party collections agency. These measures can destroy you financially and go far beyond just your tax debt.
Why, then, would I say yes and no to answering a debt collection letter…?
Representing yourself can be a costly mistake
If the IRS sends a notice that your payment was a few dollars short, or a few hundred – there’s really no need to respond. The letter tells you what to do and it’s easy to take action. Just pay the balance due. However, if you’re dealing with a debt that you don’t agree with or a large sum of money, it’s usually best to get professional help.
If you were called into a court of law, you’d want a lawyer representing you. When you find yourself in dispute with the IRS, you deserve the same kind of representation. An Enrolled Agent or CPA who specializes in tax resolution should be on your team to ensure the best possible outcome.
In some cases, you could unknowingly forfeit some of your rights, just by signing a form or agreeing to a certain arrangement. For instance, you could extend the statute of limitations on a tax debt that is expiring. Proper representation will protect you from this kind of mistake.
Beyond the first letter
Regardless of what happens with the first letter, if you still owe a balance you’ll be in ongoing communication with the IRS and this can be very stressful.
If you do seek professional help with your tax problem, your tax resolution specialist can represent you in all future communications. That means the IRS will call or mail them directly on your behalf, so you no longer need to deal with them. You’ll be kept in the loop if there are any changes, and the best part is you don’t have to ever talk to the IRS. That peace of mind alone can make it worthwhile to reach out to a tax resolution specialist.
If you’ve received a letter from the IRS, or have a matter that hasn’t been resolved, contact me for a consultation. My name is Noel Lorenzana, I’m an Illinois licensed, Registered Certified Public Accountant, specializing in tax resolution.
If you have questions about Should You Respond to an IRS Collections Letter?, contact me for a consultation. I’m an Illinois licensed, Registered Certified Public Accountant with over 25 years of experience. I’m dedicated to providing outstanding tax and accounting services.
Disclaimer: Any accounting, business or tax advice contained in this article, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, I would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.