IRS Notices Resume for the Holidays

Just in time for the holidays, the IRS announced that it will resume issuing “balance due” notices to taxpayers. IRS Notices to taxpayers who have unpaid tax balances were suspended temporarily in early May due to the COVID-19 pandemic that created incredible delays in receiving and processing IRS mail. The IRS feels that their mailroom is caught up now and that all payments that taxpayers mailed in have been processed. So, they decided to re-start notifying taxpayers of their unpaid taxes, plus interest and penalties, of course.

Here’s what to know if you get an IRS Notice about unpaid tax balances:

Why the IRS sends Notices
The IRS sends Notices to taxpayers who have a balance due, or who the IRS hasn’t heard from them after a prior contact. IRS Notices explain why the amount is due and what the taxpayer’s options are. The urgency of each Notice escalates if prior Notices are ignored, up to placing a lien on assets or property. IRS Notices are usually multiple pages long and tedious to read, but they contain a lot of valuable information about the issue. So, read carefully.

How to Respond
IRS Notices generally require a response by a specific date. There are two main reasons you’ll want to meet that deadline – to minimize the accrual of additional interest and penalty charges, and to preserve your appeal rights if you don’t agree. If the information that the IRS has on file doesn’t match the information you reported on your tax return, you may need to complete the Notice Response Form and provide more documents to support the return. If you made a mistake, you need to pay up.

Payment Options
Taxpayers who are unable to pay are encouraged to consider available payment options to stop penalties and interest from continuing to accrue. Taxpayers who were impacted by the pandemic or other circumstances may qualify for relief from penalties due to reasonable cause if they made an effort to follow the rules, but were unable to pay the tax due because of circumstances beyond their control. Taxpayers should call the toll-free number on their notice to request penalty relief due to reasonable cause.

Whatever the Notice says or how you respond, be sure to keep copies of all the Notices, your responses, and any support documents in your tax records. You might need to refer to them later.

Getting an IRS Notice shouldn’t ruin your holidays. Knowing why you got a Notice, how to respond and your payment options will get you back to trimming the tree before you know it. Need more details? The IRS has them for you at https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter.