Unresolved IRS tax problems can continue to worsen over time. In addition to penalties and interest accruing, options to dispute tax issues become fewer, making it essential to respond to any IRS notice in a timely manner. In cases where this isn’t possible or was simply overlooked, however, there may still be other options to dispute IRS tax assessments, penalties or collection actions.
Late Response Options to IRS Examinations (Audits)
Failing to respond to IRS examination correspondence can result in the IRS assessing the proposed tax change. When this happens, two options are still available to dispute the tax increase, including:
Audit Reconsideration: You may request audit reconsideration if you:
- Moved and did not receive correspondence from the IRS;
- Have additional information to present that you did not provide during your original audit; or
- Disagree with the assessment from the audit.
Offer in Compromise (Doubt as to Liability): Doubt as to Liability exists when there is a genuine dispute as to the existence or amount of the correct tax debt under the law. It’s important to note that these offers are different from what Doubt as to Collectability offers, as they are not based on the ability to pay the outstanding liability.
Late Response Options in Penalty Cases
The IRS assesses numerous penalties for filing or paying late, including:
Penalty Abatement Requests: If the penalty hasn’t been paid or was paid within the past two years, a written request to the IRS requesting penalty abatement can be made. The IRS will abate penalties if the taxpayer can establish a reasonable cause for the tax compliance failure. In cases involving a taxpayer’s first penalty, the IRS will sometimes abate the penalty under its first-time abatement procedure.
Appeal to the IRS Office of Appeals: Taxpayers can appeal penalty abatement request denials, but the IRS has an administrative requirement that these appeals must be filed within 60 days of the denial. As of August 2021, the IRS is not enforcing the 60-day filing deadline.
Late Response Options in Collection Cases
Certain collection actions that the IRS takes to enforce the collection of a past due amount can be disputed, even if the taxpayer failed to respond to prior collection notices, including:
Collection Due Process (CDP) Hearing: In cases involving the IRS lien filings, asset seizures and wage garnishments, the taxpayer has 30 days to request a hearing to discuss collection alternatives. Unfavorable outcomes in these cases, however, can still be taken to the U.S. Tax Court.
Equivalent Hearing: In cases in which the taxpayer missed the 30-day window for a CDP hearing, a request for an equivalent hearing can be filed up to one year from the lien, levy or garnishment notice date. These hearings function much like a CDP hearing except an unfavorable decision cannot be disputed in the U.S. Tax Court.
Late Response Options in Other IRS Matters
IRS Automated Underreporter Program Cases: Even if the IRS assessed a tax amount for what it asserted was unreported W-2 or Form 1009 income, the IRS Automated Underreporter unit will reopen the case and reconsider any information not previously provided.
Employer Shared Responsibility Payment (ESRP) Cases: The ESRP unit will reopen cases in which it previously assessed the ESRP against large employers for not providing health insurance in addition to reconsidering any information not previously provided.
We’re Here to Help
Bennett Thrasher’s Tax Controversy practice can help you navigate how to best respond to late IRS notices. To learn more about our services, contact James Pickett, Director of our Tax Controversy practice, by calling 770.396.2200.