Facing a dispute with the IRS can be one of the most stressful experiences for any taxpayer in the United States. Whether it's an unexpected letter, an audit, an accumulated debt or a threat of levy, simply dealing with the Internal Revenue Service generates anxiety, uncertainty and many times, confusion.
The good news is that there are multiple legal mechanisms to resolve this type of situation.In most cases, with the right advice, it is possible to reach fair solutions, avoid major penalties and even reduce or eliminate the existing debt.
Resolving disputes with the IRS is not just about answering letters or blindly signing agreements. It involves understand the problem in depthKnow your rights as a taxpayer, present the correct documentation, choose the right strategy and negotiate intelligently.
Whether you are an individual or a business, knowing the process and acting in time can make the difference between a quick solution or a lasting sanction.
At JJRB, we have spent years helping taxpayers to regain control of their tax situation, negotiate with the IRS and build new financial stability.
Main causes of disputes with the IRS
Understanding the source of a tax dispute is the first step in resolving it. In many cases, problems with the IRS are not due to an evasion attempt, but to unintentional mistakes, misunderstandings or lack of expert advice. Below, we review the most frequent causes for which a taxpayer -person or company- can get into conflict with the Internal Revenue Service.
1. Inaccurate or misstatement of statements
One of the most common causes of conflict is filing returns with mathematical errors, omitted income or improper deductions. The IRS automatically compares your return with information forms it receives from third parties (such as banks, employers or investment platforms).
Practical example: If you forgot to include freelance income shown on a Form 1099, you will likely receive a letter from the IRS notifying you of a discrepancy and requesting payment of the missing tax.
2. Non-payment of taxes
Another common cause is owing taxes, either for failure to pay in full in the tax return or for debts accumulated in previous years. This generates interest and penalties that grow over time.
Consequence: The IRS may initiate collection actions such as garnishments, freezing bank accounts or withholding on future returns.
3. Failure to file declarations
When a taxpayer fails to file a timely return, especially if he or she has had substantial income, the IRS may assume income based on prior filings and send a "substitute return" with a much higher tax proposal than would be due if the return had been filed correctly.
4. Improper use of credits or deductions
Many taxpayers make mistakes by applying credits such as the Earned Income Tax Credit (EITC) or child credits without meeting all the requirements. This can result in adjustments, penalties or loss of the right to use the credit in the future.
5. Misinterpreted legislative changes
Tax legislation changes frequently. After tax reforms, many errors arise due to confusion on new amounts, deductions or required forms.
Example: The 2017 tax reform caused many errors in the first years due to adjustments in standard deductions, rates and rules for small businesses.
6. Random audits and reviews
The IRS conducts selective audits, often random, but also motivated by "red flags" such as:
- Very high or very low revenues for ZIP code.
- Statements that change drastically from one year to the next.
- Unusually high deductions in proportion to income.
Although being audited does not necessarily imply a breach, it can escalate into a dispute if not properly responded to.
Identifying the exact cause of the IRS dispute is not only helpful, it is essential to resolving it correctly. Many people react with fear or avoidance to a letter from the IRS, when in fact the ideal is to act with information and strategy.
At JJRB we help you analyze the root of the problem, gather the necessary documentation and establish the best course of action for your situation. Every conflict has a way out, but only if it is clearly understood from the beginning.
Types of IRS notices and actions you need to know about
The IRS does not act arbitrarily or unexpectedly. Each time it initiates a process, it sends a formal notice by mail. Understanding these notices-their codes, meanings and consequences-is critical to acting in a timely manner and preventing the problem from escalating.
Here are the most common types of letters and what each one implies:
1. Letter CP2000 - Discrepancy Adjustment Proposal
This notice is sent when the IRS detects that the information reported on your return does not match with the one registered by other sources (banks, employers, etc.).
What should you do?
- Review the discrepancy.
- Send a response within the deadline (usually 30 days).
- Accept or reject the proposed adjustment.
Tip: This letter is not an auditThe questionnaire is not a complete answer, but it can lead to one if not answered correctly.
2. Letter 4883C - Identity Verification
If the IRS suspects that someone has filed a fraudulent return using your information, they will send you this letter so that you can verify your identity before processing your refund.
What does it imply?
- It is not a penalty.
- You must respond with proof of identity.
- Do not ignore this letter or your reimbursement will be put on hold.
3. Letter CP504 - Notice of Intention to Foreclose
It is a warning that the IRS will take compulsory collection measures (such as garnishing wages or bank accounts) if you do not respond or resolve your debt.
Urgent action:
Contact a professional to negotiate with the IRS and avoid more serious consequences.
4. Letter 1058 or LT11 - Notice of Intent to Levy and your right to a hearing.
This letter is part of the more serious IRS collection process. It means they are close to taking levy action.
You have the right to:
- Request an appeal hearing (Collection Due Process Hearing).
- Negotiate a payment plan, an offer in compromise or deferment.
Recommendation: Act immediately with professional advice.
5. Audit Notification (Letter 2205-A or 3572)
Indicates that your statement has been selected for audit. A review of specific documents, interview or face-to-face visit may be requested.
Practical advice:
Be well prepared, organize your papers and never face an audit without specialized guidance.
6. Letter CP523 - Noncompliance with a payment plan
If you have an agreement with the IRS and do not comply with the required payments or filings, you will receive this letter.
Opportunity:
Before canceling the agreement, the IRS allows you to reinstate or renegotiate it. Ignoring it may revoke all previous benefits.
Each IRS letter represents a stage in the process. Some are simple warnings or requests for information; others are serious notices of impending action.
Failure to respond is the worst mistake. The IRS interprets silence as denial or noncompliance. Instead, acting with speed, understanding and strategy can lead to a favorable resolution.
At JJRB we help interpret each notice, prepare the appropriate response and, if necessary, represent you directly before the IRS so you don't face the process alone or blindly.
Legal options for resolving disputes with the IRS
When a dispute arises with the IRS, many taxpayers mistakenly believe that there is "no way out" or that IRS decisions are final. However, the U.S. tax system offers a multitude of options. legal mechanisms to resolve disputesThe company's main objective is to reduce debts and avoid coercive measures, even in advanced cases.
Below, we explain the main options available to you:
Installment Agreement (Installment Agreement)
It allows paying the tax debt in monthly installments. It is one of the most widely used solutions.
Types of plans:
- Short-term: Less than 180 days.
- Long-term: More than 180 days, up to 72 months in most cases.
Advantages:
- Avoid liens and aggressive collection actions.
- You can manage it online if your debt is less than $50,000.
Practical application: Ideal for taxpayers with constant income who cannot pay everything immediately.
2. Offer in Compromise (OIC)
It is an agreement to pay the IRS less than the amount owedif you can prove that you cannot cover the total amount without suffering financial hardship.
Requirements:
- Verify that full payment would cause "economic injustice".
- Be up to date with previous declarations.
- Submit detailed income, expense and asset forms.
Tip: Although difficult to obtain, it can be a definitive solution for people in complex financial situations.
3. "Currently Not Collectible" (CNC) request
If you are going through a critical financial situation, you can ask the IRS to temporarily suspend the collection of your debt.
What does it mean?
- The IRS will not levy or collect, but the debt will still exist.
- It can be reviewed every 1-2 years.
Practical application: A solution for those who cannot afford to pay anything now, but hope to improve their situation later.
4. Administrative Appeals
If you disagree with an IRS decision, you can request an independent review through an appeal.
Common situations:
- Audits with which you disagree.
- Miscalculated debts.
- Rejection of credits or deductions.
Key advantage: It is an efficient way to resolve the conflict without the need to go to court.
5. Collection Due Process Hearing (Collection Due Process Hearing)
If you received a letter of intent to levy (LT11), you have the right to request a hearing with the IRS Office of Appeals.
What is there to discuss?
- Validity of the debt.
- Alternatives to embargo.
- Evidence of economic hardship.
Recommendation: Filing this request on time (within 30 days) temporarily stops the seizure.
6. Assistance from Taxpayer Advocate Service (TAS)
It is an independent office within the IRS that assistance to taxpayers with serious problems that have not been solved through normal channels.
When to use it:
- When you face significant economic damage.
- If the IRS is unduly delaying your case.
- When you need urgent mediation.
Many disputes with the IRS seem insurmountable, but with clear information and proper advice, there is almost always a way to resolve them legally.
The key is to act quickly, prepare solid documentation and use the mechanisms that the system itself offers. Whether paying in installments, negotiating a reduction or requesting a suspension, the goal is not only to "pay less", but to resolve with dignity, legality and a vision of the future.
At JJRB, we walk our clients through the entire process, representing them before the IRS and designing a customized strategy so they can focus on their life or business... without the constant burden of a tax debt.
Conclusions
Disputes with the IRS do not have to become a never-ending nightmare. While it is true that the Internal Revenue Service has broad powers to collect debts and enforce compliance, it is also true that there are multiple legal, humane and accessible avenues to resolve any dispute in an orderly and strategic manner.
As we saw throughout this article, discrepancies with the IRS can have many causes: errors in the return, accumulated debts, incorrect use of credits or simply a lack of adequate information. But the most important thing to understand is that any conflict can be resolved if you act with promptness, knowledge and professional support.
Ignoring a letter from the IRS or letting a debt grow unchecked only makes the situation worse. Instead, reviewing notices in a timely manner, understanding your rights as a taxpayer and exploring tools such as payment agreements, appeals, offers in compromise or temporary suspensions can make a dramatic difference.
At JJRB, we believe that No taxpayer should face the IRS alone or uninformed. Our job as tax consultants is to guide you step by step, defend your interests and build with you an effective and lasting resolution strategy. Because in tax matters, what today seems like a dead-end problem, tomorrow can be transformed into an opportunity to start over with financial peace of mind and full compliance.
If you are dealing with a letter, an audit or a debt with the IRS, don't face it with fear. Face it with expert advice, legal support and confidence that there is a solution..
