Question IRS Letter CP504

[azphoenix]

Hi, I just received via register mail two IRS letters CP504 for 2 years of taxes that are included in my Chapter 13 . I have been in an active Chapter 13 since April of 2022. I contacted my attorney. However he basically said the IRS can do what they want and he will reach out to the person at the IRS that filed the claim to see what is going on. I'm in panic mode as I have a mortgage that is paid outside the BK and I can't afford to have IRS seize my bank account. And now it makes sense why I have not received my small tax refund for 2023. I had no problem last year. Any advice? Thank you.

[justbroke]

I usually don't say this, but call the IRS Insolvency Department (look them up on line) as ask if they filed a claim in the Chapter 13 and why you received a CP504. The IRS should have a record of your Chapter 13 and that it was confirmed or something else is going on.

No, the IRS can't just do what they want if they try to collect pre-petition debt. The IRS has been spanked many times.

[despritfreya]

You received a Notice of Intent To Levy while in an active Chapter 13 for taxes that are included in the 13? Your attorney is telling you that there is nothing that can be done but that he will look into it?

This sounds like a clear violation of the automatic stay and, of course, there is something your attorney can do. He picks up the phone, calls the IRS and asks the agent to rescind the Notice of Intent to Levy and to not send any other such notices for taxes that are included in the bk. This is bk 101 so what am I missing here?

Now, assuming the taxes are pre-petition, here is what typically happens:

The IRS codes a debtor's file to stop collection notices etc once it gets notice of a bk. On occasion, the code "falls off" and no one notices. A notice of some sort is sent to the debtor. The debtor calls his/her attorney. The attorney says "don't worry" and calls or emails the IRS (yes, that call is to whoever filed the claim in the bankruptcy). The IRS agent apologizes and then reenters the code. No big deal.

As to the tax refund - it is unlikely that the IRS set off your refund from a post-petition year to a pre-petition debt as doing so would be a violation of the automatic stay. You filed bk in 2022. If your 2023 refund was kept to pay a pre-petition debt it probably was done in error.

Keep us posted on what you find out.

Des.

[azphoenix]

Thank you all for your help and advice. I called the BK department at the IRS. The IRS had mirrored the accounts in Nov 2023 because my ex-husband (these had been joint taxes) for 2016 and 2018 had called the IRS to make a payment plan on behave of himself, since those tax years are included in my Chapter 13. When this happened the IRS took my taxes out of the bankruptcy and did not put them back in. So it triggered the Letter. IRS said this is now fixed once they looked into. Fingers crossed.... The IRS did tell my they mailed my refund to my Chapter 13 trustee because he requested that. This did not happen last year, and had a small refund. Looks like the trustee wants the refund now. My plan only states that I give copies of my tax return. I have adjusted my paychecks, so hopefully I should break even for this year 2024 taxes. Thank you again, this forum is always so helpful.

[justbroke]

Generally speaking, the IRS Insolvency Department is excellent in customer service. I have never had a complaint. They are professional and they can fix things. I also had a spouse where they split the account and we got a divorce on top of that. The IRS systems said I had a balance and I did not. All of my past due tax was included in the bankruptcy. It was very pleasant working with them and they added the codes back in the system to prevent any issues.

I'm glad they were able to help you!

[azphoenix]

I agree with you. The IRS Insolvency Department was very nice and seemed to solve the problem as I was on the phone with them. I wish by attorney was as nice. He was not happy with me that I called the IRS. He thinks I wasted his time/and also the IRS claim person time because he had sent an email to them. I certainly did not want to waste anyone's time. However, my attorney was not very helpful and I had to ask him several times on a phone conversation how to resolve this or to contact someone, to just to be talked down to. At that moment I felt I needed to get the information myself. Advise for anyone out there, do your research on an attorney. It makes a huge difference on case and stress level when issues arise. Thank you all so much for all your wisdom and advice.

[Carmella]

azphoenix it's good you called the IRS. They were very helpful to me when I was active BK 13 and could not pay the post petition taxes. I only dealt with the BK department at the IRS, until we were discharged then I set up a payment plan for late taxes with the "regular" part of the IRS. I did have some complications when I paid voluntary payments during BK because I didn't know to list them under my husband SS because his name was listed first on the tax forms so that was frustrating, but it got straightened out. I also learned not to call before or after a holiday when the more experienced IRS workers might take a long weekend! It's better when the new worker can contact an experienced person in real time if there's something they don't know!