An Overview of IRS Letter 725-B
What to Expect if the IRS Requests to Meet With You in Person
The IRS recently announced that subject to rare exceptions, it will no longer send IRS revenue officers to visit taxpayers unannounced. This doesn’t mean the IRS will no longer have in-person meetings. Instead, these meetings will be set up ahead of time through the use of Letter 725-B, Meeting with Taxpayer – Confirmation.
What Is Letter 725-B, Meeting with Taxpayer – Confirmation?
The 725-B is a letter that the IRS sends out when it wants to have an in-person meeting with a taxpayer. This letter will ask that the taxpayer contact the IRS to schedule this appointment. For individual taxpayers, these meetings can take place at the revenue officer’s office, although telephone conferences may occur in special situations. For business taxpayers, these meetings will be held at the taxpayer’s place of business.
Along with Letter 725-B, a taxpayer can expect to receive Form 9297, Summary of Taxpayer Contact. This document requests financial information from the taxpayer that they can bring to the 725-B appointment.
Note that in some cases, you can receive Form 9297 without Letter 725-B. In that case, you can usually just communicate with the IRS employee through the mail or over the phone, rather than in person.
Why Is the IRS Stopping Unannounced Meetings?
When the IRS mentioned this policy change, it identified two main reasons for stopping surprise taxpayer visits. First, there’s the greater intensity of anti-IRS feelings in recent years. The IRS has never been a beloved government agency, but lately, there’s been an increase in the negative perception of the IRS such that it began affecting the physical safety of IRS revenue officers.
Second, tax scammers will sometimes pose as IRS employees, go to people’s homes, and demand money or personal information. Traditionally, these scams took place by letter or telephone, but an aggressive cohort of scam artists have been showing up in person, confusing and scaring taxpayers. In some cases, the police were called and were equally uncertain as to what was going on.
These door-to-door scams were made more effective because the IRS did in fact send employees to peoples’ homes. Now that the IRS will mostly be stopping this practice, law enforcement and taxpayers can be more confident that when there’s an unexpected visitor at their door who says they’re from the IRS, it’s probably a scammer.
When Will the IRS Mail a Taxpayer a 725-B Letter?
The IRS will send this letter when it wants to schedule a meeting with the taxpayer. The IRS wants this meeting so it can get a closer look at the taxpayer’s income and assets. They will then help the taxpayer figure out how to pay off a tax bill, such as by setting up a payment plan or installment agreement. These meetings may also be scheduled when the IRS wants to obtain unfiled tax returns.
Regardless of why the IRS wants to see you, from now on, they will almost always contact you in advance to schedule a meeting. They won’t just show up at your home or business unannounced.
Will Unannounced Meetings with IRS Revenue Officers Still Occur?
Yes, but they will be rare. The IRS anticipates that less than a few hundred unannounced visits will happen each year. These will typically occur when the taxpayer is being served a subpoena and/or summonses or the IRS wants to seize property and there’s a risk that the taxpayer will try to move, hide, or sell the property to keep it from the IRS.
What Should I Do if I Get the 725-B Notice from the IRS?
The first thing you should do is note the deadline to respond to the IRS to set up the appointment. If you fail to respond to the IRS in time, the IRS may start the process to garnish your wages and/or levy your bank account.
The second thing you should do is look for Form 9297 and provide the financial information it asks of you. Next, you should decide where to have this meeting. As mentioned earlier, these meetings will often take place at an IRS field office, but having the appointment at your home is also a possibility. However, unless special circumstances dictate otherwise, do not have this meeting at your home.
This is because during the meeting, the revenue officer will note everything they see in and around your home. For example, they’ll take note of your standard of living. If they see two brand new cars in your driveway, they’ll remember that. Then, in the future, if you decide to ask the IRS to grant you hardship status, for instance, the IRS will remember you just bought two brand new cars and conclude that your claims of financial struggles are not true.
Even if you are truly having financial difficulties, the fact that the IRS saw those two vehicles means you now have extra work to explain to the IRS why those vehicles don’t accurately represent your true financial situation.
Do I Need to Hire a Tax Professional for the 725-B Appointment?
Maybe. Having time to decide whether to get help when responding to the IRS at this meeting is one of the biggest advantages of the new 725-B letter policy. In the past, the IRS could show up unannounced and if you didn’t have an attorney, enrolled agent, or CPA already working for you, there was a good chance you’d have to participate in this meeting on your own. Now, this letter gives you time to decide whether you want to hire someone and if so, who you want to hire.
You don’t always need to hire someone to help resolve your tax matter. If you feel confident you understand what’s going on and what the IRS needs from you, then you can probably handle the appointment on your own. Variables to consider as to whether to hire a tax professional include whether or not:
- You’ve had prior tax problems with the IRS.
- There are complicated factual or legal issues relating to your tax situation.
- You can afford to hire someone.
- You can afford to pay your tax bill in full.
- You agree with the IRS’ position concerning your tax balance.
- There’s a risk of the IRS placing a lien or levy on your property.
- The IRS is trying to collect a significant amount of money from you.
There are several benefits to hiring a CPA, lawyer, or enrolled agent to represent you at this meeting.
Benefits of Tax Attorney Help With 725-B Meeting Requests
The first advantage is that the tax professional will have a better idea of what’s really going on when the IRS agent asks you a question or requests a particular document. Your tax representative will know the difference between a relevant request and a “fishing expedition” request.
In this latter situation, the IRS officer may hope you’ll provide extra information (or information you don’t actually have to provide if you don’t want to) that makes it easier for the IRS to collect money from you. And if you are required to comply with the request, your tax representative will ensure that you’re only providing the information the IRS has asked for, no more and no less.
Professional tax expertise will also come in handy when deciding which documents you need to bring to the meeting. This can save you a lot of time responding to Form 9297 and prevent you from giving the IRS more information than required.
Another advantage is that when providing a document or answering a question, your tax professional will know when the IRS is properly considering that information. For example, in deciding if you meet the financial eligibility requirements for an offer in compromise, your tax professional can make sure the IRS revenue agent is properly excluding certain assets from consideration such as assets you use for work or assets in your name that effectively belong to someone else.
Lastly, your representative will make sure the IRS follows the proper procedures and honors your rights when handling your tax matter. This could include having enough time to respond to a request or giving you the correct information about your legal options if you want to appeal an IRS decision.
Get Help Responding to Letter 725-B
If you have questions about a 725-B letter from the IRS or aren’t sure if you need a tax professional’s assistance, get in touch with The W Tax Group. We offer free consultations and will learn more about your specific situation to help you decide what to do next.