After a two-year pause due to the COVID-19 pandemic, the Internal Revenue Service will continue sending out LT38 collection letters to taxpayers.
These automated collection notices started going out in January and should go out in the regular mail on a staggered basis over the next several months, the Detroit Free Press reported. The purpose of these notices is to update consumers about their tax balances and provide instructions for resolving any debt, according to LifeHacker.
In the United States, 3.7 million taxpayers are expected to receive these notices, the Detroit Free Press wrote.
“If you received [an] LT38 notice, it’s letting you know that during the pandemic some collection notices were suspended,” the IRS said on its website. “However, we’re resuming normal operations and providing you with an update on your outstanding balance to help you stay informed and offer you self-service options to resolve your account. This isn’t an audit.”
Individuals and businesses were granted penalty relief in 2020 and 2021 as a result of the LT38 suspension, the IRS said. While the agency said in December 2023 that it will waive some failure-to-pay penalties for eligible taxpayers affected during those two tax years, the failure-to-pay penalty will continue for taxpayers eligible for relief on April 1.
Resuming the collection notices “marks [the] end of [the] pandemic-related pause.”
A paper backlog led to these notices being temporarily suspended in February 2022 from being sent to taxpayers, the Detroit Free Press wrote. These notices let taxpayers with tax debt know what is owed, outline how they can pay and provide a detailed amount of any penalty relief the person might receive.
The IRS suggests that people who receive an LT38 should first follow its instructions and file any missing tax returns as soon as possible, the agency said. It also suggests paying the unpaid balance or paying as much as possible now, both of which will stop any interest and applicable penalties that have accrued over time.
Payments can take up to 21 days to post on your account, the IRS continued. If taxpayers have fully paid off their balance, they can disregard their LT38. Those who have an approved payment plan can continue to make payments per that plan’s agreement.
“If you’ve applied for a payment plan, but haven’t yet been approved, pay as much of your balance as you can now to minimize additional interest and applicable penalties added to your balance,” the IRS said.
Taxpayers who can’t pay their full balance due can visit IRS.gov/payments to figure out how they can resolve their bills. They can also use the Online Payment Agreement tool if they qualify to set up a payment agreement.
Those who are undergoing financial hardship may be determined they cannot pay any of their tax debt, the IRS said. Such cases can have their account reported “as currently not collectible to temporarily delay collection until your financial condition improves,” the agency continued. This does not mean the account’s status will stop receiving penalties and interest, nor does it mean the debt goes away, but that “the IRS has determined you can’t afford to pay the debt at this time.”
Taxpayers who insist collection from their account should be temporarily delayed can contact the IRS and be prepared to talk about their income, expenses and owned assets, the agency said and added, “We may request proof of your financial hardship.”
“Under certain circumstances, an offer in compromise allows you to settle your tax debt for less than the full amount you owe,” the IRS said. “This may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship. Access the Offer in Compromise Pre-qualifier tool to see if you qualify for an offer in compromise.”
