The IRS next week will start sending letters to millions of Americans regarding unpaid tax bills, resuming a practice that was suspended several years ago.
The letters will be sent to people with tax debts before the tax year 2022 and to tax-exempt organizations, businesses, and trusts and estates with tax debts before 2023.
“These notices and letters were previously paused due to the pandemic and high inventories at the IRS but will gradually resume during the next several months,” the release reads. “Current tax year 2022 individual and third quarter 2023 business taxpayers began receiving automated collection notices this fall as the IRS took steps to return to business as usual.”
The pandemic-related pause in letters “meant that some taxpayers who have long-standing tax debt have not received a formal letter or notice from the IRS in more than a year while some of this older collection work has been paused,” it reads. “To help the taxpayers in this category as the normal processes resume, the IRS will be issuing a special reminder letter to them starting next month.”
The letter will remind the taxpayer of his or her “liability” and will tell the taxpayer to contact the agency or make “alternative arrangements” to settle the debt. Taxpayers are also urged to “carefully read any letter or notice they receive” before they call the IRS.
“After receiving the reminder mailing, these taxpayers with long-standing unresolved tax issues will receive the next notice, informing them of a more serious step in the tax collection process,” it stated.
Warnings
Generally, the CP14 notice is the first one the agency sends out for an unpaid tax balance, which is usually followed by three to four reminder letters that are sent out every five weeks or so, according to Darren Guillot, who previously served as an IRS deputy commissioner.“You can’t bury your head and pretend it’ll go away,” he told CNBC earlier this month. Most taxpayers can set up a payment plan for themselves by scanning a QR code, he added.
Multiple tax specialists warned that Americans who receive these letters could face significant penalties, including funds being taken out of their bank accounts by the federal agency.
“People have been sticking their head in the sand since time immemorial,” he said. “They see something from the IRS, and they don’t want to open the envelope.”
A third letter sent by the IRS will likely include a demand to pay the IRS within 90 days or file an appeal, Mr. Gibson noted. When that happens, the taxpayer will be “dealing with revenue agents, and their objective in life is to collect money.”
“They can be somewhat ruthless,” he said.
For millions of Americans, the initial notices sent in 2024 “will be an unpleasant wake-up call,” said Niles Elber, a tax lawyer at Caplin & Drysdale. It’s because many likely haven’t received the notices for the past two years because of the pandemic-related pause.
“Ignoring the problem will not stop the notices from coming, which will ratchet up in intensity and ultimately lead to tax liens and levies,” he added. “Taxpayers who have outstanding balances should start thinking now about how they are going to pay their tax debt.”
“If you don’t pay the amount due immediately, the IRS can levy your income and bank accounts, as well as seize your property or your right to property including your state income tax refund to pay the amount you owe,” the IRS website states.
