The Consequences of Ignoring IRS Letters and Notices

Receiving a letter from the Internal Revenue Service (IRS) can be unsettling. Many taxpayers are tempted to ignore these notices, hoping the issue will resolve itself. However, ignoring IRS letters can have serious consequences, ranging from financial penalties to legal actions. In this blog, we will explore the potential repercussions of disregarding IRS correspondence and why addressing these letters promptly is crucial.

1. Accruing Penalties and Interest

One of the immediate consequences of ignoring IRS notices is the accumulation of penalties and interest on unpaid taxes. If the IRS determines that you owe additional taxes, they will assess one or more of several applicable penalties.  Interest accrues immediately. Over time, these additional costs can significantly increase the amount you owe, making it more difficult to settle your tax obligations.

2. Loss of Refunds or Tax Credits

If the IRS believes a taxpayer has omitted key information, they will send a CP2000 which is a proposal to make changes.  The taxpayer has 30 days to respond, accepting part or all the proposal or showing cause why the IRS is wrong.  Not responding or if the IRS disagrees with the response, refunds and credits may be lost.

3. Liens and Levies

If tax controversy remains unresolved, the IRS can take more severe collection actions. A federal tax lien is a legal claim against property, which can affect the ability to secure loans. Worse, the IRS can impose a levy, seizing assets such as bank accounts, wages, and even property to satisfy the tax debt. These actions can have devastating financial consequences.

4. Wage Garnishment

The IRS has the authority to garnish wages to collect unpaid taxes, penalties and interest. Wage garnishment means that a portion of the gross paycheck up to 25%  will be withheld and sent directly to the IRS, which can create financial hardship disrupting one’s ability to cover essential living expenses.

5. Legal Consequences

In extreme cases, prolonged failure to respond to IRS notices can lead to criminal charges. While the IRS prefers to resolve tax matters administratively, cases of tax evasion or fraud may result in prosecution, leading to imprisonment.

How to Handle an IRS Notice

If you receive an IRS letter, take the following steps:

• Sit Down

• Read it carefully to understand the issue.

• Call Books, Taxes & More at 678-717-9818 for help. 

• Let us help evaluate and respond appropriately to the correspondence. 

• We will represent you so you don’t make critical mistakes dealing with the service

Conclusion

Ignoring IRS letters and notices can have serious financial and legal consequences. Whether the letter concerns unpaid taxes, missing documentation, or potential audits, addressing the issue promptly can prevent costly repercussions. Having the professionals at Books, Taxes & More act as guides will preserve taxpayer assets and solve the problem as quickly and efficiently as possible.