Back Tax CPA discusses IRS Notice CP 90, Final Notice of Intent to Levy and Notice of Your Right to a Hearing, Letter 1058, Final Notice, Notice of Intent To Levy and Notice of your Right to a Hearing, and IRS Notice CP504, Urgent! We intend to levy Certain Assets

Back tax CPAs see new Clients who’ve let the clock run out on their IRS back tax issues. They’ve received one of the three final IRS notices and need to do something quick before the IRS issues a federal tax lien and then levies the taxpayer’s assets. Game over.

The IRS has multiple tax collection departments, so the three common “final notices” look different but the process is similar. Here’s the top three deadliest IRS Notices:

• IRS Notice CP 90, Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
• Letter 1058, Final Notice, Notice of Intent To Levy And Notice Of Your Right To A Hearing.
• IRS Notice CP504,Urgent! We intend to levy Certain Assets.

Good News

These three letters and notices demand un-paid back taxes. Many of my “late” clients haven’t filed the original back tax returns covered by Notice CP 90, Letter 1098 or Notice CP 504. If a taxpayer hasn’t filed their own returns, the IRS files a substitute tax return for them. You really don’t want to accept their version of the back tax return. The substitute tax return doesn’t factor in legitimate deductions and credits.

Filing an accurate back tax return almost always decreases the IRS demand for back taxes which reduces the penalties and interest. Often there’s enough decrease in back tax liability to get the Clients head off the block. The game is still in play but taxpayer options increase.

“An accurate back tax return almost always decreases the IRS demand for back taxes, which reduces the penalties and interest. Often there’s enough decrease in the back tax liability to get the Client’s head off the block. The game is still in play but taxpayer options increase and taxes due decrease.” 
- Gary Bode back tax CPA

Back tax cases, even those submitted under Notice CP-90, Letter 1058 and Notice CP 504 can result in refunds. Strange but true.

Sometimes filing an amended return does the trick - maybe the IRS doesn’t see the whole picture

I had a Client who received an IRS Notice 504 demanding $190,000. The IRS received a Form 1099-C, Cancellation of Debt, from a rental real estate property foreclosure. The client’s copy went to a bad address. Cancelled debt becomes taxable income unless you exclude it using Form 982.

I just amended the return to include Form 982. Poof the cancelled debt income disappeared. The rental real estate foreclosure is a sale. The Client suffered enough loss on the sale to generate an IRS and State refund.

The timeline on Notice CP-90, Letter 1058 and IRS Notice CP 504

Back tax CPAs automatically send the IRS a request for more time to prepare the back tax returns. But with the three deadly notices above that’s not always possible. The taxpayer can request a CDP hearing, giving us 90 days to prove the IRS is wrong. We accept the CDP option with no intention of actually going to Court. I know it seems like a bad chess move but requesting the CDP hearing is sometimes logical.

Some Tax Positioning strategies if there’s time

Let’s look at a scenario where some back tax is still due despite the best efforts of your back tax CPA.

Tip: don’t squander valuable defense time by procrastination. Here are some tax positioning strategies that facilitate paying, and sometimes preventing an IRS tax lien.

• Putting your IRS account in the currently non-collectible category. Sort of like Limbo.
• Proactively posturing the Client for an Offer in Compromise e.g. have the IRS accept less than what you owe as full payment.
• Setting up an Installment Agreement with the IRS. You might think this is a given. But it requires cash flow coordination with current tax returns and estimated tax payments for next year.

Back Tax CPA Fees

Often the cost of back tax return preparation is less than what I’d have charged if we had done them all on time. But the timeline is so tight and the IRS processes are so rigid there’s often more peripheral expenses. Moral of the story? Bringing your back tax return case to a CPA sooner helps both the back tax case outcome and lowers lower. Here’s a list of possible additional expenses:

• Obtaining Power of Attorney for you with the IRS.
• Dealing with multiple IRS notices.
• Dealing with State Notices.
• Letters to the IRS.
• Looking at or positioning you to qualify for an Offer in Compromise.

If you receive:

IRS Notice CP 90, Final Notice of Intent to Levy and Notice of Your Right to a Hearing, Letter 1058, Final Notice, Notice of Intent To Levy And Notice Of Your Right To A Hearing, or IRS Notice CP504, Urgent! We intend to levy Certain Asset, time is running out, read a few of our back tax posts. Check us out through the NC CPA board and Angie’s list. Call us (910) 399-2705.

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