I do not think I owe this. What can I do?

You have options. The hard part is that there are several, and which one fits you depends on how the debt got there rather than on how much it is.

Pick the wrong one and you can lose months. Some requests get sent straight back without being looked at.

Working out which door is yours is the first thing we do on a case like this. Send us the notice and we will tell you which one it is.

First, a word about where you are in the process

If the IRS is already taking money or has filed a lien, you may be in a collection appeal. That has its own deadlines and they are short.

In one of those hearings, called a Collection Due Process hearing, you can only discuss whether you owe the amount, or how much, under limited circumstances. IRS: Collection due process FAQs.

So the amount is often not something you can argue in the room you are already standing in. That is why this page exists.

If a notice with a deadline on it has arrived, send it to us before you do anything else. The deadline on it usually matters more than the argument.

The three ways to reopen what you owe

When the hearing cannot consider the amount, the IRS names three routes to reopen it. IRS: Collection due process FAQs.

1. Pay the amount in full and file a claim for refund
2. Request an audit reconsideration
3. File an Offer in Compromise, Doubt as to Liability

They are not interchangeable. The third one is where people start and should usually finish.

Route 1: pay it, then claim it back

You pay the amount due in full, then file a claim for a refund. If the IRS disallows the claim, you have the right to appeal at that point. IRS: Collection due process FAQs.

That is a real option. It is also the one that asks the most of you up front, because you are paying something you do not think you owe.

If you go that way and the claim is disallowed, there is a clock. You have 2 years from the date of the notice of claim disallowance to file a refund suit, and Appeals looking at your disallowed claim does not extend that 2 years. It can be extended by mutual agreement. IRS Publication 5, District Court and the U.S. Court of Federal Claims.

That is the kind of date we put on the calendar for you on day one, so it is not a surprise in eighteen months. If you would rather we filed the claim and tracked the clock, we can.

Route 2: audit reconsideration

This is the route for a debt that came out of an audit. It also covers a return the IRS filed for you when you did not file one. IRS Publication 3598.

The IRS lists the reasons you might ask for one.

• You did not appear for your audit
• You moved and did not get the IRS’s letters
• You have information to present that you did not provide during the original audit
• You disagree with the assessment from the audit

IRS Publication 3598.

What makes the IRS accept it

The IRS lists what makes a request acceptable.

• You submit information the IRS has not considered before
• You filed a return after the IRS completed a return for you
• You believe the IRS made a computational or processing error in assessing your tax
• The liability is unpaid, or credits are denied

IRS Publication 3598.

That third one is worth noticing: a straightforward arithmetic or processing error is on the list in its own right.

But do not read it as a way round the documents. Publication 3598’s own first step says to verify that your supporting documentation is new information that has not been presented before. IRS Publication 3598. The IRS’s collection pages put it as a requirement: you must submit new information it did not previously consider. IRS: Collection due process FAQs.

So if your point is a computation error, say so plainly and still show your working. We would rather set it out properly than have it returned for thin evidence.

Three things the IRS says will stop it

The IRS will not accept an audit reconsideration request if any of these is true.

• You already agreed to pay the amount by signing something. A Form 906 Closing Agreement, a compromise agreement, or a Form 870-AD with the Appeals office
• What you owe comes from final partnership item adjustments under TEFRA, the Tax Equity and Fiscal Responsibility Act
• The US Tax Court, or another court, has issued a final determination on your tax liability

IRS Publication 3598.

That first one catches people who signed something years ago to make a problem go away.

And one that sends you elsewhere rather than stopping you

If you have already paid the amount in full, this is not your route, but it is not a dead end either. You file a formal claim instead, on Form 1040-X. IRS Publication 3598.

The good news on timing

There is no deadline. You can ask any time after the examination assessment has been made on your account, while the tax remains unpaid. IRS Publication 3598.

The IRS does not require a special form, though it recommends Form 12661, Disputed Issue Verification, to explain what you disagree with. Documentation has to come with the request. IRS Publication 3598.

Do not send original documents. They will not be returned. IRS Publication 3598.

You send us what you have. We tell you what is missing, put it against the right tax years, and write the explanation that goes with it.

Pulling your IRS records and reading what was actually assessed is where we start on one of these. We request the transcripts, read the file, and tell you in plain language what the IRS thinks happened. Reading those for people is usually where we begin, and it does not commit you to anything.

While they look at it

When the IRS receives your documentation it may delay collection activity. It may also resume collection if your documentation does not support your position and you do not respond to requests for more information within 30 calendar days. IRS Publication 3598.

And if you already have an installment agreement, you must keep making the payments. IRS Publication 3598.

That 30-day response window is the one that catches people. With your authorization we take over the IRS contact, so the letters come to us and nothing sits unopened.

Route 3: the offer form, and why it is usually last

This one is Form 656-L, Offer in Compromise, Doubt as to Liability. It exists where there is a genuine dispute about the existence of, or the amount of, the correct tax debt under the law. You do not have to dispute the whole bill. It is for a legitimate doubt that you owe part or all of the debt. IRS Form 656-L.

A note on which form. The IRS’s own collection due process page still points readers at Form 656-B here. The current 656-B booklet sends doubt as to liability cases to Form 656-L. Use 656-L. IRS Form 656-B.

Now the part almost nobody is told.

The IRS would rather you did not file it

Form 656-L opens with an eleven-question check. Ten of the eleven answers tell you not to file it, and send you somewhere else instead. IRS Form 656-L, DATL Pre-Qualifier Assessment.

Here is that list in plain terms. If any of these is your situation, the offer form is the wrong paperwork.

IRS Form 656-L, DATL Pre-Qualifier Assessment.

Only the eleventh answer leads to the form. It is for someone who does not believe they owe all or part of the debt and has already pursued any of the applicable alternatives above. IRS Form 656-L.

One more gate sits on that answer. If you do not have a tax debt, you are not eligible for an offer until you have received a balance due notice. IRS Form 656-L.

Most people who feel wronged by a tax bill do not need this form. They need one of the ten other things. If you would rather we worked out which row you are on and filed the right thing for you, we can.

If you file it anyway, out of order

The IRS is explicit. Unless your debt is a Trust Fund Recovery Penalty or a Personal Liability Excise Tax, you should pursue those other options first. IRS Form 656-L.

And if another IRS process is already running on the same liability, you have to let it finish.

• If you are already working with the IRS, or responding to a notice about the same issue, you must resolve that first
• If another IRS function is addressing the liability, audit reconsideration for example, you must wait until that process is complete
• Failing to resolve outstanding issues may result in the IRS returning the offer without further consideration

IRS Form 656-L.

A returned offer is lost time. You tell us what the IRS has already done on this debt. We check whether anything is still running, put the steps in the order the IRS expects, and prepare the one that goes first.

Who cannot use it at all

You do not qualify if any of these applies. IRS Form 656-L.

• The liability has been settled by a final court decision or judgment
• The assessed tax is based on current law
• You are in an open bankruptcy. You may file once the bankruptcy is completed or discharged
• You are paying or owe restitution to the Department of Justice. The IRS has no authority to compromise restitution assessments
• You already have an accepted offer for the same tax year and the same liability, on either of two specific bases: doubt as to collectibility, or doubt as to liability
• You have a deactivated Individual Taxpayer Identification Number. That has to be sorted out first
• You have made an election under section 965(i) for the liability in question. The IRS will not compromise those. A liability deferred under section 965(h)(1) is compromised only in narrow circumstances set out in the form

We would rather tell you on day one that you are on that list than take you through a filing that comes straight back.

The mechanics, if it is genuinely your route

• You must explain in writing why all or part of the debt is wrong, with supporting documentation. Without it the offer is returned without further consideration
• Your offer should reflect what you believe you actually owe, and it must be $1.00 or more. A $0 offer is returned without processing
• Do not send any payment with it. There is no deposit and no application fee
• If you cannot reconstruct your books and records, you must give an explanation that establishes reasonable doubt

IRS Form 656-L.

Two trade-offs worth knowing before you sign

Submitting the offer costs you something, and the form says so in its terms.

• It gives the IRS more time to assess, and it is more than a year. The new deadline becomes your current one, plus the whole time your offer is pending, plus one more year
• That longer deadline applies if the offer is rejected, returned or terminated, or if you withdraw it
• And you cannot really refuse that. The IRS may not consider your offer at all if you decline to waive the period, or if you give only a limited waiver
• The collection clock pauses while they look. The period for collecting the debt is suspended while the offer is pending. It stays suspended for 30 days after a rejection, and while a rejection is with the Independent Office of Appeals
• If it is accepted, the argument is over. Once the IRS accepts in writing, you have no right to contest the amount, in court or otherwise
• A lien can still be filed. The IRS may file a Notice of Federal Tax Lien while the offer is being considered

IRS Form 656-L.

Being upfront about the trade-offs is part of the job. We would rather you knew what you were signing away than find out later.

If you agree you owe it but cannot pay

That is a different problem with a different form, and it is worth saying plainly because the two get mixed up constantly.

If you agree you owe the tax but cannot pay it, do not file Form 656-L. That situation uses Form 656, in the 656-B booklet. IRS Form 656-L.

You also cannot run both at once. You cannot submit a doubt as to liability offer and a separate offer based on inability to pay at the same time. Send both and the inability-to-pay one is returned without further consideration, and any initial payment with it is not returned. IRS Form 656-L.

The IRS says it is in your best interest to settle any disagreement about whether the debt is valid before filing on inability to pay. IRS Form 656-L.

So the order is: settle what you owe first, then talk about what you can pay. Which of the two your case actually is, is the thing we work out with you before anything is filed.

Who can help you with this

You can do all of it yourself. If you want someone to act for you, the IRS needs a signed authorisation: Form 2848 for representation, or Form 8821 if you only want someone to receive your information. Form 8821 does not let them represent you in a collection matter. IRS Form 656-L.

You may not need to pay for help. A Low Income Taxpayer Clinic can represent people on a low income before the IRS or in court, and can help people who speak English as a second language. Any service an LITC provides must be free or for a small fee. The list is in IRS Publication 4134. IRS Form 656-L.

The Taxpayer Advocate Service is independent inside the IRS. It offers free help in three situations.

• Your tax problem is causing financial difficulty
• You have tried to resolve it with the IRS and been unable to
• You believe an IRS system, process or procedure is not working as it shouldIRS Form 656-L.

We say all that out loud because a route that costs you nothing is still the right route if it fits. If you would rather we took it on, we represent you before the IRS with your authorization. The same small team stays on it from the first call to the last.

What to gather before you call anyone

• Every letter the IRS has sent, in date order
• The examination report if there was an audit, usually Form 4549
• Anything that supports your side, including documents the examiner never saw
• A note of what you have already sent the IRS and when
• Whether any part of the amount has been paid, because that changes which route is open

Where this leaves you

If you think the IRS has it wrong, the question is not “how do I fight this”. It is “how did this debt get created”, because that decides the route.

An audit created it, so audit reconsideration. Something on your own return was wrong, so amend it. A penalty only, so penalty relief. Already paid in full, so a refund claim. And the offer form at the end of that list rather than the start of it.

If you want a second pair of eyes on the letter before you file anything, IRS Help offers a free 30 minute consultation. Bring the notice. There is no pressure, and we read your IRS records before anyone commits to anything. You can reach us through the contact page.

This article is general information about federal tax procedure. It is not legal or tax advice about your situation. Which route is open to you depends on the notice you received and your own facts.

By Sarah WackerIRS Help, LLC

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