The IRS will send Form LT16 to you if you have unsettled taxes and are also missing tax returns from recent years. Receiving a form LT16 almost always needs a call to the IRS to straighten out the situation.
Different from many IRS collections notices, IRS Form LT16 – Your Account Has Been Marked for Enforcement Action, comes with a very brief deadline. Instead of the normal 30 days from the date listed on the letter, you have only got 10 days to respond.
Before you try 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 find out where you stand with the IRS.
Consequence of Ignoring Form LT16
When you receive form LT16, act as soon as possible to prevent further action from the IRS. If you ignore the form, you will accrue extra fees and penalties for your unpaid tax debt as well as the missing tax returns.
Regardless of what is written 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 bother about a levy or wage garnishment until you have received these “final notice” forms.
However, that doesn’t imply that you should ignore Form LT16. Form LT16 means that you have missing tax returns and you could face extra penalties for failing to file your returns on time.
Steps to Take If You Receive Form LT16 from the IRS
Instead of going into IRS negotiations blindly, keep calm and follow the following steps when you receive Form LT16.
- Pay the bill if you can
Basically, you should pay the total amount due listed at the bottom of Form LT16. The IRS receives checks, electronic payments, debit or credit cards.
But immediately you pay your overdue tax debt, your problems may not be over if you received Form LT16. The form shows you may have failed to file tax returns or the IRS is missing important information about your tax returns.
- Determine Why You Received Form LT16
If you have past due tax debt, the IRS normally sends forms CP501 Standard IRS Bill and CP502 Balance Due Reminder Notice before threatening to levy your property or bank accounts.
But if you did not file tax returns, the IRS is less understanding about a missed payment.
If you failed to file, you will be unable 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 ensure your tax returns are up to date, as well.
There are also additional fees and penalties related with a failure to file tax returns.
- File Any Missing Returns
Immediately you determine which tax returns are missing, you should consult with a tax attorney or tax accountant to assist you file the missing returns. A tax accountant can help make sure you don’t miss any deductions that you are owed, which can reduce your tax liability.
A good tax accountant will also help ensure you file all your income and that you don’t take deductions or report information that might look doubtful 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 details 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 get 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 given out before the IRS got 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 decide your next best steps and negotiate a payment arrangement for your tax debt which has not been paid.
Who has to File Tax Returns?
Most Americans who earn W-2 or 1099 income during the previous tax year have to file tax returns by April 15 of the following year. If you received an LT16 form, it’s likely you thought you didn’t have to file tax returns, but the IRS agents felt a different way about the situation.
There is a common misconceived idea 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 think it isn’t worth the time and possible cost of a tax accountant to file. They would rather miss out on their tax refund.
However, this isn’t essentially 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 gives a short, 12-minute quiz, “Do I need to file a Tax Return?” that can aid you in determining 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 sure. If it looks like you don’t need to file a tax return, you can try putting a call through to the IRS to dispute the tax notice, or get a tax professional to make the case on your behalf
Don’t Wait For Enforcement Action from the IRS
Missing tax returns can result to lots of hassles, additional IRS penalties, and further collections action from the IRS. Do not 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 assist you in filing missing returns and make plans to pay your past due taxes before the deadline on the LT16 notice.
If you miss the deadline: The IRS may issue a levy against wages, bank accounts or other assets if you make contact with the IRS to resolve your account within 10 days.