Yesterday, the IRS announced that it was suspending a number of notices while it continues to work through its backlog of cases. Included in the suspended notices are the first three notices in the collection notice stream. These notices trigger additional work for the IRS answering phones and otherwise dealing with issues that result from its outgoing correspondence. Hopefully, the suspension of these notices will assist the IRS in getting itself back to normal after the long period of digging out caused by the shutdown two years ago in the middle of the filing season while also providing relief to individual taxpayers still dealing with the pandemic. The IRS Information Release is provided below in its entirety.
The suspended notices listed make clear that the IRS will not be asking taxpayers for past due returns during the period of this suspension. It has suspended this type of activity before in times when it was busy. We reported on a TIGTA report discussing this here.
It will not be sending out collection notices other than, if I am reading the descriptions of the letters properly, the notice and demand.
The IRS is statutorily obligated to send out the notice and demand letter within 60 days after assessment. If it fails to send out the notice and demand letter, the failure does not destroy the assessment but it prevents the federal tax lien from coming into existence. The IRS should continue to send out this letter.
An interesting development is that it is not sending out the statutorily required notice of intent to levy letter required by IRC 6331(d). It doesn’t need to send out this letter unless it intends to levy but without sending out this letter, the last letter in its notice stream, the letter giving Collection Due Process rights, will not allow the IRS to levy. So, even though the IRS does not list the CDP letter (Letter 11) in the list below, I think it will suspend sending out that letter as well, at least with respect to levies, since sending out that letter will not allow the IRS to levy in the absence of the 6331(d) letter it states here it is going to suspend.
Note that it may have already sent out the 6331(d) letter to someone which would allow it to go ahead with the CDP letter and it states in the notice that it may still be sending out some letters already scheduled.
I hope that the IRS will take this opportunity to rewrite the 6331(d) letter, which is a terrible letter and perhaps the most misleading letter it uses. The letter currently gives taxpayers the impression that following the 6331(d) letter the IRS can levy on their assets; however, it cannot. The letter is effective if the goal is to make people think that’s what is about to happen but it is misleading in that without the mailing of the CDP letter (and the 30-day wait thereafter) the IRS has no right to levy on a taxpayer’s assets following the 6331(d) letter. (I note the IRS might quibble with my statement arguing that the letter allows it to levy on a taxpayer’s state tax refund if that taking is viewed as a levy and not an offset.) I find the 6331(d) letter an inexcusable overreach as it is currently written.
Why is it that the CP504 doesn’t allow for levy of other than state income tax refund? It appears to conform to the 6331(d) requirements and is substantially similar to the LT11. Perhaps because it offers the right to a CAP appeal instead of a CDP?
Because the IRS must send both the 6331(d) notice and the 6330 (aka CDP) notice before it can levy, by only mentioning 6331(d) in the 504 letter the IRS is not legally able to levy as a result of that letter. It must wait until after it gives the 6330 notice. The 504 letter does not leave readers, except careful readers, with that impression and is misleading on the impact of the 6331(d) notice which by itself has basically no effect. The reason the IRS must cite to the requirements in two statutes before levy rather than one is that when 6330 came into existence in 1998, Congress did not remove 6331(d) as it might logically have done since 6330 has all of the requirements of 6331(d) and more. Originally, the IRS included both notices in the same letter but about a decade ago moved the 6331(d) notice to the third notice in the notice stream and began trying to use the language of that code section to make people think the third letter was important when it is not, at least not by itself.