Protect Yourself from Scammers by Knowing How the IRS Communicates

If the IRS does call a taxpayer, it should not be a surprise because the agency will generally send a notice or letter first. Understanding how the IRS communicates can help taxpayers protect themselves from scammers who pretend to be from the IRS with the goal of stealing personal information.

Here are some facts about how the IRS communicates with taxpayers:

● The IRS doesn't normally initiate contact with taxpayers by email. Do not reply to an email from someone who claims to be from the IRS because the IRS email address could be spoofed or fake. Emails from IRS employees will end in irs.gov. ● The agency does not send text messages or contact people through social media. Fraudsters will impersonate legitimate government agents and agencies on social media and try to initiate contact with taxpayers. ● When the IRS needs to contact a taxpayer, the first contact is normally by letter delivered by the U.S. Postal Service. Debt relief firms send unsolicited tax debt relief offers through the mail. Fraudsters will often claim they already notified the taxpayer by U.S. mail. ● Just because someone references an IRS notice in email, phone call, text, or social media, does not mean the request is legitimate. ● IRS revenue agents or tax compliance officers may call a taxpayer or tax professional after mailing a notice to confirm an appointment or to discuss items for a scheduled audit. ● Private debt collectors can call taxpayers for the collection of certain outstanding inactive tax liabilities, but only after the taxpayer and their representative have received written notice. Private debt collection should not be confused with debt relief firms who will call or email taxpayers with debt relief offers. Taxpayers should contact the IRS directly regarding filing back taxes properly. ● Taxpayers should remember that payment will never be requested to a source other than the U.S. Treasury. ● When visited by someone from the IRS, the taxpayers should always ask for credentials. IRS representatives can always provide two forms of official credentials: a pocket commission and a Personal Identity Verification Credential.

Form 5564 Notice of Deficiency Waiver

If the IRS believes that you owe more tax than what was reported on your tax return, the IRS will send a Notice of Deficiency explaining the additional tax due and how the amount was calculated. Included with the Notice of Deficiency will be Form 5564, Notice of Deficiency Waiver, which the IRS asks you to sign and return to them.

If you disagree (either partially or completely) with the proposed additional tax due, then you should NOT sign Form 5564. Form 5564 should be signed and returned to the IRS only if you fully agree with the additional tax due.

Taxpayers who disagree with the additional tax assessment have 90 days (or 150 days if the taxpayer lives outside of the U.S.) to resolve the matter. There are no extensions to the ninety-day window. As a first step, you may want to submit a letter to the IRS stating why you disagree with the notice, and include with your response copies of any documentation supporting your position. If you have not been able to resolve the matter with the IRS and the ninety-day window is close to expiring, you will want to submit a petition to Tax Court to challenge the deficiency assessment.

What is backup withholding?

Businesses who pay nonemployee compensation of $600 or more for the year must report these payments to the IRS using Form 1099-NEC, Nonemployee Compensation. The business generally does not withhold taxes from such payments. However, there are situations when the business is required to withhold a certain percentage of tax from these payments in order to ensure the IRS receives the tax due. The business's requirement to withhold taxes from payments not otherwise subject to withholding is known as backup withholding.

For example, nonemployee compensation may be subject to backup withholding if a payee has not provided a Taxpayer Identification Number (TIN) to the payer or the IRS notifies the payer that the payee provided a TIN that does not match their name in IRS records. Backup withholding can also apply to other types of payments reported on Forms 1099 (e.g. 1099-INT, 1099-DIV, etc.) as well as Form W-2G (gambling winnings).

The current backup withholding tax rate is 24%. The business withholds this 24 percent tax from the payee’s compensation, and the business must file Form 945 annually to report all backup withholding for all payees for the year. Generally, the tax deposit rules for Form 945 are the same as those for Form 941 (payroll taxes).

A payee can stop backup withholding by correcting the reason for becoming subject to backup withholding. This can include providing the correct TIN to the payer, resolving the underreported income, paying the tax owed, or filing the missing return(s), as appropriate.