(LOS ANGELES, Calif.) — NEWS: James Cha, a CPA and a Certified Tax Resolution Specialist from Ace Plus Tax Resolution, alerts that the IRS is ramping up collections and tax audits in 2024, and urges taxpayers to act with tax relief strategies.
:: IRS Increasing Audits, Collections, and Tax Levies in 2024
For years, the IRS paused many collection actions due to COVID-19, halting notices from its Automated Collection System. But in 2024, that reprieve ends as the agency ramps up collections and audits with increased funding.
If you haven’t received IRS notices recently about unfiled returns or unpaid taxes, expect that to change. The IRS is hiring more auditors and resuming collection notices aggressively. Be prepared for stepped-up IRS collections efforts in 2024.
:: 2024 IRS Hiring Increase and Enforcement Efforts to Surge with New Funding
The Inflation Reduction Act provided $80 billion for the IRS to modernize and enhance tax enforcement. With the funds, the agency plans to hire thousands of new auditors, revenue officers, and personnel. The hiring blitz is already underway.
James states, “The IRS currently has about 14,000 enforcement personnel but aims to rapidly expand its workforce, with a 55% auditor increase targeted for 2024 alone according to watchdog reports.”
:: Resumption of IRS Collection Notices
During the COVID-19 pandemic, the IRS took many steps to help taxpayers, including increased tax credits, new tax credits for employers, and halting many collection activities.
As of 2024, the IRS is sending out new collection notices, and it’s using Letter LT38 to alert taxpayers about upcoming collection notices. The agency is also sending out demands for payment and notices about unfiled returns.
If you have unpaid taxes or unfiled tax returns, expect to see the following notices soon:
* LT38 – This notice alerts you of your unpaid tax debt and advises you that the agency is going to start sending out notices again. It also informs taxpayers of automatic penalty relief on failure-to-pay penalties for tax years 2020 and 2021 for taxpayers with assessed balances of $100,000 or less for each tax year.
* CP59 – The IRS sends this notice to people with unfiled tax returns. You can respond by filing the enclosed Form 15103 which allows you to explain why you haven’t filed or why you’re not required to file. If you don’t respond, the IRS may issue a substitute for return to assess tax against you more than you were supposed to owe and start the collections process.
* CP3219N – The IRS uses this notice of deficiency to alert people with unfiled returns about a proposed tax assessment made against them. When you receive this notice, you have 90 days (150 days if you’re out of the country) to file a tax return, appeal in Tax Court, or agree with the assessment.
* CP504 – The IRS sends this notice to people with unpaid taxes before it seizes their state tax refunds and starts to seize other assets (wages, bank accounts, personal/business property, real estate, etc.). The IRS started sending these notices to people who owe for 2022 and older tax debts.
The IRS is boosting compliance efforts, intensely targeting high-income non-filers. In a Feb 29 announcement, the agency said it issued over 125,000 notices for unfiled 2017-2022 returns. Around 25,000 cases involve taxpayers with over $1 million income, while 100,000 are for those earning $400,000-$1 million.
However, that doesn’t mean you don’t have to worry if you have unpaid taxes and your income is lower than the above thresholds. Janet Yellen did not deny a claim that 90% of new IRS audits would be on individuals making less than $400,000 annually. Also, The IRS still uses the $200,000 threshold to measure high-income returns since it defined high-income taxpayers as those with a total positive income of $200,000 or more.
As the IRS continues to increase collection efforts through 2024 and beyond, the agency will reach out to millions of taxpayers at all kinds of income levels.
:: Taxpayer Options for Unpaid Taxes
Unpaid taxes can be extremely stressful, but there are options. The IRS offers the following payment plans and relief options to taxpayers who owe back taxes:
* Installment agreement – Take up to the collection expiration date to make monthly payments on your tax debt. Interest and a small late payment penalty will continue to accrue on your account, but the IRS won’t pursue any collection actions against you.
* Partial payment installment agreement – A special type of monthly payment plan with a reduced amount where the IRS waives the remaining balance at the end of the payment plan, but you must provide financial disclosure to prove that you’re paying the highest monthly payments that you can afford.
* Offer in compromise – You pay the most you can afford to pay based on your income and assets in a lump sum or 24 monthly payments with this one-time settlement. The IRS forgives the remaining balance, but you must stay compliant with certain rules for the next five years or you risk losing the agreement.
* Currently not collectible – To get your account marked as currently not collectible, you must prove to the IRS that you can’t afford to pay anything. Then, the IRS pauses all collection actions against you until your finances improve.
There are also other relief programs that may be able to help you. For example, unpaid payroll taxes can lead to severe consequences from the IRS, including the Trust Fund Recovery Penalty, levies, and seizures, but seeking professional tax representation can help resolve these issues and protect your business from the IRS’s aggressive collection actions.
Penalty abatement can reduce or eliminate penalties based on reasonable cause or first-time incidents. The IRS’s Innocent Spouse program helps taxpayers who are facing tax debt due to actions their spouse took without their knowledge. Additionally, depending on the situation, you may also want to look into tax appeals, OICs based on doubt of equity, or OICs based on effective tax administration.
:: Steps Towards Compliance: Responding to 2024 Notices
IRS Commissioner Danny Werfel said, “The IRS is now taking swift and aggressive action to close the tax gap and has a variety of efforts underway to improve compliance in overlooked areas.”
If you receive an LT38, CP59, CP504, or any other IRS collection notice, don’t ignore it. Failure to respond will lead to increased penalties and more interest, and it could subject you to involuntary collection actions such as tax liens, wage garnishments, tax levies, and passport revocation or denial.
A tax relief professional can also help you identify the best option and negotiate with the IRS on your behalf.
:: Get Ready for IRS Collections 2024
James advises, “There are numerous tax relief options that are put forth by the government, but individuals and business owners should seek an experienced tax relief specialist who can strategize, take full advantage, and save considerable sums of money for taxpayers.”
About Ace Plus Tax Resolution:
Ace Plus Tax Resolution provides customized solutions to taxpayers with IRS and state tax problems. James Cha is a CPA and Certified Tax Resolution Specialist at Ace Plus Tax Resolution, and has been representing his clients and dealing with the IRS for 35 years. His practice is in Los Angeles, yet his clients are all across the nation. Learn more at: https://aceplustaxresolution.com/
Contact him at (213) 600-7388 or James@AcePlusTaxResolution.com for a free consultation.
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