What to do if the IRS threatens you over taxes already paid

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Taxpayers facing threats from the IRS despite paying their taxes can make their problems go away — but they shouldn’t expect it to be easy, experts tell The Post.

The agency has created a bureaucratic headache for the thousands of people who likely received letters threatening to seize their property over federal tax debts they had already paid.

While the scary snafu is unlikely to cause lasting financial damage such as a lowered credit score, affected taxpayers could end up spending anywhere from a few hours to a few months sorting out the problem, experts say.

“The process to clear it up can range from very simple to quite involved depending upon what number you call and who you get on the phone,” Harvey Bezozi, an accountant who specializes in large IRS tax controversy cases, told The Post. “One has to be resilient and follow through to make sure the payment that they sent in was properly received and credited so that no additional problems occurred.”

Echoing the IRS’ own advice, accountants said a phone call is the first line of defense for anyone who received an erroneous “Notice of Intent to Levy” letter.

Taxpayers can ask the agency put a hold on their account until the check they mailed in clears, or provide evidence that the payment has been made, according to tax experts.

The letters won't hurt credit scores because they're simply warnings that the IRS could take action.
The letters won’t hurt credit scores because they’re simply warnings that the IRS could take action over a purportedly unpaid tax debt.
Getty Images/iStockphoto

But callers could face long waits because the understaffed agency has been overwhelmed with these kinds of inquires while struggling to process tax returns during the coronavirus pandemic, experts said.

“The IRS is about five months behind on processing all things paper, so I would say [the letters would take] months to resolve, simply because they’re so behind,” said Nicole DeRosa, senior tax manager at accounting firm Wiss & Company.

“They need to address the bigger underlying problem and they really should stop these notices from going out in general until they’re caught up,” she added. “You’re scaring people and it’s wasting a lot of paper.”

Hiring an accountant could make the process easier as the IRS has a dedicated phone line for tax practitioners, according to experts.

There is a silver lining: the letters won’t ding taxpayers’ credit scores because they’re simply warnings that the IRS could take action over a purportedly unpaid tax debt.

If that warning is ignored, the agency could eventually file a notice of federal tax lien, which the IRS warns could potentially affect the person’s credit rating.

Taxpayers could end up spending anywhere from a few hours to a few months sorting out the problems.
Taxpayers could end up spending anywhere from a few hours to a few months sorting out the problems.
Getty Images

But the big three credit bureaus — Equifax, TransUnion and Experian — stopped using tax liens in credit reports in 2018, “so they should not impact your credit score,” said E. Martin Davidoff, head of the national tax controversy practice at the international accounting firm Prager Metis.

The IRS did not immediately comment Wednesday. But the agency previously told The Post it would work with taxpayers “to resolve cases as expeditiously as possible and provide appropriate relief where warranted.”

The IRS is “not attempting to terrify taxpayers who are being compliant,” Davidoff said. “They are there to do the right thing and like any large agency, realistically, some stuff will fall through the cracks.”

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