For some taxpayers the regular notices the IRS sends out about a balance due serve merely as a reminder or even nuisance about an unpaid tax. And there are other taxpayers that interpret even the tamest IRS collection notice as a threat of enforcement. In fact, both interpretations of the IRS collection notices probably have some truth. What is important is to know which letters are the most important and why.
In this piece I want to highlight what I believe to be the most important letter in the IRS collection process, Letter 1058. This letter is titled very specifically Final Notice, Notice of Intent to levy and Notice of Your Right to a Hearing. The exact same message and rights can be presented as an LT 11, CP 297 and CP 90.
I refer to the Letter 1058 (as well as the above-referenced notices) as the Final Notice. The Final Notice is a critical step in the collection process because it presents for the first the IRS’ right to take enforcement action such as the levying or accounts.
The Final Notice offers a taxpayer 30 days to file a Request for Collection Due Process or Equivalent Hearing (CDP), Form 12153. That appeal gives the opportunity to discuss collection alternatives with the Appeals Division of the IRS. If a taxpayer or its representative fails to file an appeal the IRS will have the right to take enforcement 45 days from the date of the letter. The 45 days allows additional time for the mailing of an appeal executed timely on the 30th day.
Despite the upside that may come from filing the appeal mentioned above it may not necessarily be the most appropriate action. The filing of an appeal in response to a 1058 will stay certain statutes of limitation relating to bankruptcy and collection. Furthermore, it could create a situation in which a business taxpayer is even more vulnerable to enforcement like in the case of a Disqualified Employment Tax Levy. And finally, the filing of an appeal may simply delay a case that could be resolved another way as it winds it way through the appeals process.
Above all Letter 1058 or the like cannot be ignored. If a taxpayer or its representative receives this letter it is important to immediately consider where the case stands. Thought should be given to the pros and cons of filing an appeal and contact should be made with the collection representative that issued the letter.