The IRS will send you Form LT16 if you have overdue taxes and are also missing tax returns from recent years. Receiving a form LT16 almost always requires a call to the IRS to straighten out the situation.
Unlike many IRS collections notices, IRS Form LT16 – Your Account Has Been Marked for Enforcement Action, comes with a very short deadline. Instead of the usual 30 days from the date listed on the letter, you have only 10 days to respond.
Before you attempt to negotiate with the IRS on your own or file past-due tax returns, consult a tax accountant, CPA, IRS enrolled agent or tax attorney to help you determine where you stand with the IRS.
When you receive form LT16, act quickly to avoid further action from the IRS. If you ignore the form, you will accrue additional fees and penalties for your unpaid back taxes as well as the missing tax returns.
In spite of the wording on the form, the IRS cannot actually seize your money or property without due process. If you haven’t received Form CP504 – Intent to Levy State Tax Refund or Other Property, Form LT11 – Final Notice of Intent to Levy, or Form CP90 – Final Notice of Intent to Levy and Your Right to a Hearing, then you don’t have to worry about a levy or wage garnishment until you receive these “final notice” forms.
However, that doesn’t mean you should ignore Form LT16. Form LT16 means that you have missing tax returns, and you could face additional penalties for failing to file your returns on time.
You can save money and stress by taking care of Form LT16 right away. But that doesn’t mean you should jump ahead and call the IRS about your unpaid taxes (as the form instructs you to do) without doing your research first.
Instead of jumping into IRS negotiations blindly, keep calm and follow these steps when you receive Form LT16.
Ideally, you should pay the total amount due listed at the bottom of Form LT16. The IRS takes checks, electronic payments, debit or credit cards.
But once you pay your overdue back taxes, your problems may not be over if you received Form LT16. The form indicates you may have failed to file tax returns or the IRS is missing important information about your tax returns.
If you have past due back taxes, the IRS usually sends forms CP501 Standard IRS Bill and CP502 Balance Due Reminder Notice before threatening to levy your property or bank accounts.
But if you failed to file tax returns, the IRS is less understanding about a missed payment.
If you failed to file, you will not be able to negotiate a payment plan or file an offer in compromise with the IRS. Even if you pay your past due taxes in full, your account will not be in good standing until you make sure your tax returns are up to date, as well.
There are also additional fees and penalties associated with a failure to file tax returns.
Once you determine which tax returns are missing, you should consult with a tax attorney or tax accountant to help you file the missing returns. A tax accountant can help make sure you don’t miss any deductions you are owed, which can reduce your tax liability.
A good tax accountant will also help ensure you report all your income and that you don’t take deductions or report information that might look suspicious or could flag an audit of your returns. You should be sure you have receipts for any expenses you deduct on your business or personal tax returns.
The information on your 1099 and W-2 forms should match the income you report on your tax returns.
If you already filed your tax returns but the IRS did not receive them, send a second signed copy to the IRS. If it was less than 10 weeks since you filed the return, call the IRS to determine your best course of action. Someone in the IRS offices may be able to track down the missing returns, or your LT16 notice may have been issued before the IRS received your returns.
Once you’ve filed, tracked down, or re-submitted your missing tax returns, consider hiring a tax expert to contact the IRS on your behalf to determine your next best steps and negotiate a payment arrangement for your outstanding back taxes.
Most Americans who earn W-2 or 1099 income during the prior tax year have to file tax returns by April 15 of the following year. (If April 15 falls on a weekend or holiday, the IRS tax deadline is moved to the next business day.)
If you received an LT16 form, it’s possible you thought you didn’t have to file tax returns, but the IRS agents felt differently about the situation.
There is a common misconception that you don’t have to file a tax return if you are owed a tax refund from the IRS. Of course, you won’t be able to collect the money owed to you if you don’t file, but some people may believe it isn’t worth the time, hassle, and potential cost of a tax accountant to file. They would rather miss out on their tax refund.
However, this isn’t necessarily true. Depending on your income level, income type, and withholding taxes, you may need to file a tax return even if the IRS owes you a refund. The IRS provides a short, 12-minute quiz, “Do I Need to File a Tax Return?” that can help you determine if you can skip the hassles of filing your taxes.
If you believe you don’t have to file a tax return because of your income level, but you received Form LT16, take the quiz to be certain. If it looks like you don’t need to file a tax return, you can try calling the IRS to dispute the tax notice, or hire a tax professional to make the case on your behalf.
Missing tax returns can cause lots of hassles, additional IRS penalties, and further collections action from the IRS.
Don’t wait for a Notice of Intent to Levy your state tax returns, wages, bank accounts, or other personal assets.
Enlist the help of a tax professional to help you file missing returns and make arrangements to pay your past due taxes before the deadline on the LT16 notice. Solvable can help you find the right tax expert to get your finances back on track.
If you miss the deadline: The IRS may issue a levy against wages, bank accounts or other assets if you contact the IRS to resolve your account within 10 days.