Why Are You Receiving LT38?

How to Prepare for Increased IRS Collections in 2024

The IRS stopped sending out many collection notices during the COVID-19 pandemic. If you owe back taxes or have unfiled returns, you may not have heard from the agency in the last few years. That is about to change. 

At the very beginning of 2024, the agency started sending out LT38 to let taxpayers know that collections are resuming. The IRS also has additional funding and is hiring thousands of new employees to ramp up collections and increase audits. 

Did you recently receive LT38? Worried about your tax debt or unfiled returns? To get help now, contact us at Damien’s Law today. In the meantime, here is what you need to know about LT38.

What Is LT38?

LT38 is a new IRS notice as of 2024. The IRS is using this notice to alert taxpayers that collection notices are going out after a hiatus during the COVID-19 pandemic. 

The LT38 will show your tax debt, penalties, and interest from each tax period that you owe taxes. The notice also states that if you don’t pay, more penalties and interest will accrue on your account, and it lets you know that the IRS has options to help you get caught up.

Penalties on the LT38 Notice

As noted above, the LT38 should show you the penalties that you have incurred for every tax period. However, you may notice that there aren’t any penalties associated with your 2020 or 2021 taxes. The IRS has created automatic penalty relief for these tax years if you meet the following criteria:

• Owe $100,000 or less in assessed tax for each year.
• Have failure-to-pay penalties – the relief doesn’t apply to failure-to-file penalties. 

If you don’t meet the above criteria, you don’t qualify for the IRS’s automatic penalty relief for these tax years, and thus, you will likely see penalties related to your 2020 and 2021 taxes. If your LT38 shows tax debts from earlier years or from 2022, there will not be any penalty relief noted for these tax years. 

What’s Going to Happen Next?

A few different things can happen after you receive LT38. The outcome depends on how you respond to this notice. Consider the following:

• If you ignore the notice – The IRS will add additional penalties to your account. The agency plans to start adding penalties to 2020 and 2021 tax debts on April 1, 2024. The IRS will also send you additional collection notices and may start collection actions such as wage garnishments or asset seizures. 
• If you respond to the notice – If you reach out to the IRS or get help from a tax attorney, you may be able to request a payment plan, apply for an offer in compromise, or pursue other arrangements for your tax debt. 
• If you dispute the notice – If you don’t believe that you owe taxes for the years mentioned on the LT38, you should contact the IRS as soon as possible. There are several different ways to deal with incorrect tax assessments, and the best approach depends on the situation. 

The IRS has more power to collect tax debts than any other debt collector. The agency can take a significant part of your wages as well as nearly any of your assets. Some assets are exempt from IRS seizure, but the list is very short. It includes certain disability payments, worker’s comp, certain pension payments, personal effects, and work tools as well as a few other items. The IRS can even take your home in some situations. 

IRS Collection Notices in 2024

The IRS is sending out this notice to let taxpayers know that the agency is sending out collection notices again, after a break due to the COVID pandemic. So, what notices are taxpayers going to be receiving? Here are just a few of the main ones that you can expect to see:

• CP14 – You owe a tax debt. Make payment arrangements to avoid collection actions.
• CP501 – Reminder that you owe a tax debt and should make payment arrangements to avoid penalties and more collection actions. 
• CP503 – Typically, this is the last “nice” reminder before the IRS starts getting more serious.
• CP504 – The IRS is going to seize your tax refund and may start seizing other assets if you don’t pay your tax bill.
• Notice of Intent to Levy – If you don’t appeal within 30 days, the IRS will start wage garnishments, asset seizures, and other tax levies.

The IRS started sending these notices to people with 2022 tax debts at the beginning of 2024. It plans to start sending notices to people who owe from earlier years after it sends out LT38.

What If You Can’t Afford to Pay

If you could easily write a check for your tax debt, you probably would have done so by now. So, what are your options if you cannot pay? Luckily, the IRS has several different options for taxpayers who cannot pay in full, including the following:

• Installment Agreements – These are monthly payment plans that typically last for three or six years, but in some cases, you can set up a payment plan that goes all the way until the collection statute expiration date (generally, 10 years from the original date of assessment). 
• Offer in Compromise – If you qualify, this program lets you pay off your tax debt for less than you owe. The requirements are strict and approval rates are relatively low. For best results, work with a seasoned tax pro when you apply. 
• Currently not collectible – If you cannot afford to pay anything, the currently not collectible status will help you avoid collection activities. You must request this status from the IRS, and if you’re accepted, the IRS will periodically review your financial situation to see if anything has changed. 

You should also explore penalty relief. If you qualify based on reasonable cause or first-time abatement, that can reduce your tax bill and make it easier to get ahead through monthly payments. 

What is IRS Gov LT38?

IRS Gov LT38 usually refers to the URL IRS.gov/lt38. The IRS prints these short URLs on its notices so that taxpayers can go online to learn more. If you type this URL in your browser, you will be directed to the IRS webpage about this notice. 

The IRS’s website mentions similar points as explained in this post. It outlines your basic options if you cannot afford to pay in full and what to do if you’re experiencing financial hardship. The IRS also explains the automatic penalty relief and what to do if you don’t qualify for penalty relief. 

IRS.gov/lt38 also provides tips on how to file unfiled returns. If you receive this notice and you’ve paid your tax bill in full within the last 21 days, the IRS website says that you can just ignore this notice. 

Finally, the LT38 webpage explains how to deal with special situations such as tax debt due to identity theft or the actions of your spouse without your knowledge. 

Get Help With IRS Tax Debt Now

LT38 isn’t the scariest IRS notice, and when you receive this notice, you still have time to make arrangements. However, the situation is going to get increasingly worse if you don’t take action. To protect your wages and assets from the IRS, you should try to resolve your tax debt as soon as possible. 

To get help now, contact us at Damien’s Law today. We are a boutique tax resolution firm that provides our clients with services customized to their needs. Don’t live in stress anymore. Let us help you put your tax problems behind you.