IRS Tax Disputes

If you’ve received a letter from the IRS stating you owe taxes, the worst thing you can do is ignore it.  Once the IRS assesses the tax, it can begin an administrative collection process without court approval.  Within 60 days of assessment, the IRS must give notice of the assessment, the amount assessed, and demand payment via a Notice & Demand.

What is an IRS Assessment?

An IRS Assessment is an act that basically establish that the taxpayer owes a debt. The IRS records that amount on its internal  books, showing a tax due that has not been previously assessed.  An assessment does not mean that the taxpayer necessarily owes the tax, it just allows the IRS to proceed administratively as if the amount is owed.

When can the IRS enter an assessment?  The IRS may immediately assess:

  • Amounts reported on a tax return;
  • Amounts taxpayer pays as a tax;
  • Correction of math or clerical errors;
  • Where a taxpayer waives restrictions on assessment; and
  • Jeopardy or termination assessments.  In these cases, the IRS decides that either the taxpayer or the taxpayer assets might disappear. In order to collect, the IRS has to make an immediate assessment without going through the Notice of Deficiency procedure.

All other instances, the IRS must first issue a Notice of Deficiency and allow the taxpayer an opportunity to contest the deficiency prior to entering an assessment.

    Liens & Levies

    The IRS can file a tax lien (with proper notice requirements) on your assets to collect an unpaid assessment. The IRS can also levy or seize assets held or owned by you to collect an unpaid assessment.  This would include assets in possession of third parties, such as banks, employers, and brokerage firms. Once the levy is made, the IRS seeks possession in order to sell.

    Collection Due Process (CDP)

    You are allowed to request a CDP hearing  30 days after the 5 business days from the date the IRS files a Notice of Federal Tax Lien.  Also, a CDP hearing can be requested 30 days from the date of the Notice of Levy. These hearings provide a venue to raise defenses (i.e. spousal relief) as well as pursue alternative payment methods, rather than collections.  

    Alternative Payment Methods

    In lieu of liens and levies, negotiated methods of payment can be utilized to pay IRS assessments.  Examples of alternative payment methods include Installment Agreements, and Offers in Compromise.