IRS Letter 725-B: What It Is and What to Do

IRS Letter 725-B is a notification to a taxpayer that their account has been assigned to an IRS revenue officer and that the revenue officer has scheduled a meeting with them.

This meeting may be held in person, but revenue officers are increasingly scheduling these meetings to happen over the phone.

IRS Letter 725-B is typically accompanied by IRS Form 9297, Summary of Taxpayer Contact, which indicates the items that the revenue officer expects you to provide to him or her on or before your meeting date.

Here is a Letter 725-B that an IRS revenue officer sent one of our clients before he hired us. We dealt with the IRS revenue officer for him so that our client didn’t have to.

IRS Letter 725-B At a Glance

IRS Letter 725-B Explained, Part by Part

Here is a full explanation of the Letter 725-B, part by part.

Note that the Letter 725-B is often accompanied by the Form 9297; for a full discussion of the Form 9297, please read this article.

Part 1: Letterhead & Officer Contact Information

At the top of this letter you’ll find the name and contact details of your designated revenue officer; this information is important as you will likely be in regular contact with your revenue officer throughout the duration of your case.

On the upper left of the letter, you’ll see the address of the IRS office your revenue officer is assigned to.

Part 2: Appointment Details & Confirmation Request

Next, IRS Letter 725-B informs you of your Notice of Appointment to a meeting with your field revenue officer. This section introduces the purpose behind this meeting, specifically in order to discuss your unfiled tax returns or any amount you may owe to the IRS.

As seen above, your revenue officer will list the details of your meeting, including the date, time and location. The IRS is more frequently choosing to schedule meetings over the phone in recent years, but pay close attention to the details given in your own letter. The IRS will inform you here as to how long you can expect the meeting to last.

Just below these details is an important request for your confirmation, asking you to confirm that you agree to attend the meeting at the given time and date. You’ll have 10 days to confirm the appointment, from the date the letter was issued, not from the date you receive it.

Your revenue officer will not cancel the meeting if you fail to confirm within the time frame given above. Instead, they may deem it necessary to contact third parties in order to acquire more information about your unfiled returns, likely leading to a substitute for return (SFR). Third parties include any employers, banks, creditors or service providers whom the IRS could request information from in order to estimate your SFR.

Part 3: Right to Representation

Next, this letter informs you of your right to representation during any part of this IRS investigation, including the scheduled appointment. If you choose legal representation, you’ll need to complete and sign IRS Form 2848, Power of Attorney and Declaration of Representative, and present it at your meeting.

If your appointment is not an in-person meeting and you choose representation before it begins, you can follow the instructions given here to either mail or fax your completed Form 2848 to your revenue officer in advance of this appointment.

In most cases, the IRS will reschedule a meeting if you decide to exercise your right to representation after the meeting has begun.

If you do opt to fax your completed Form 2848, the IRS urges you to be aware of the privacy and security policies of the fax service you use. It’s important to protect yourself when sending your sensitive personal and financial information, especially if you’re using an online fax service.

Part 4: Documents for Delinquent Returns

The next section lists the documentation you’ll need for your meeting if you have unfiled, or delinquent, tax returns. If you have filed any of the returns listed (see Part 7 below), then you should prepare a signed copy of those returns for your appointment. If you have not filed any of the returns listed in the table below, you’ll need to complete and sign them in advance.

If you can’t complete the requested returns in time, the Letter 725-B states that you should provide payroll documents or income statements, as applicable. However, we do not recommend this approach; there is no need (at this point) to divulge this information to the revenue officer; simply prepare the requested returns.

If you believe you are not liable to file the unfiled returns as requested, you will have an opportunity to present your reasoning why.

Part 5: Documents for Balance Due Collections

Next, you’ll find listed the documents you’ll need to have ready for your meeting if you owe a due balance to the IRS. If you’ve recently paid that balance in full, the IRS may have issued this notice to you before they received your payment. In any case, if you’ve paid the full amount you owe, you can provide proof of payment.

If you have not yet paid the full amount you owe, you’ll be asked to do so, or as much as you’re able, in this meeting. If you’re unable to pay the full amount owed, this letter is asking you to provide proof of your finances in order to determine your suitability for alternative payment options such as installment agreement, offer in compromise, or currently not collectible status.

Note that we do not recommend simply providing the revenue officer with your financial information and letting him or her determine what the resolution to your case should be as they will likely propose a very high installment agreement monthly payment amount, along with possible initial liquidation of assets.

We routinely have clients who come to us after they attended their 725-B meeting frightened because the revenue officer proposed an installment agreement amount of thousands of dollars per month; however, after reviewing the case and interfacing with the revenue officer ourselves, we are often able to get that amount significantly lowered.

Part 6: Relevant Tax Periods

In the following table you’ll find the relevant tax periods for which the IRS believes you have an unfiled return or an overdue balance.

Below the table, you’ll find a note regarding IRS Form 9297, Summary of Taxpayer Contact. You’ll need to bring the documents listed on this form if you can’t bring copies of your filed returns or pay your balance in full. Again, however, this is not ideal — you want to prepare the tax returns beforehand so you can fully understand your tax situation and not leave yourself at the mercy of the revenue officer.

Part 7: Note on Interest

Next, the notice provides information relating to the accrual of interest on all overdue tax bills. The IRS charges interest at the current federal short-term rate plus 3 percent, compounded daily. Interest begins to accrue on overdue balances from the date a particular tax liability is due until it’s paid.

If you’ve got any further penalties assessed to your account, interest will also accrue on those charges.

Part 8: Late Payment Penalty

The following section introduces the penalty for late payments, also known as the Failure-to-Pay penalty. This penalty is typically issued as 0.5% of the total unpaid tax bill for each month, or part of the month, that your balance remains unpaid.

Part 9: Potential Consequences of Failure to Comply With Notice 725-B

Next, the Letter 725-B details some of the potential consequences that you are at risk of if you fail to provide the necessary information and documentation during or after your appointment.

These consequences include issuance of a summons to you or relevant third parties, escalation of collection actions to issue a levy or seize assets, or preparation of a SFR. While some of these are examples from the extreme end, no matter what stage you’re at with the IRS, it’s important to take any notice or letter you receive seriously.

Part 10: What to Expect at Your Appointment

This brief section mentions that the goal of the meeting is to find some resolution between both parties regarding your unfiled and/or unpaid taxes. You can expect the meeting to last approximately two hours, and the primary activity will be reviewing the information and documentation you have provided.

Part 11: What Happens If You Don’t Respond

If you fail to respond to Notice 725-B, the IRS may be obliged to escalate its efforts to collect the debt in question. Furthermore, if you confirm your attendance but subsequently miss the appointment, or fail to provide all of the requested information, your case may also escalate.

This part of the notice reminds you that it’s in your best interests to keep the appointment and cooperate with the IRS.

Part 12: Your Next Steps

Here your revenue officer explicitly states what you need to do next in order to cooperate and move closer to a resolution of your case. You are instructed to contact your designated revenue officer in order to confirm the appointment, and ask any questions you may have about it.

As noted earlier in the letter, failure to respond within 10 days of the issuance of this notice will not result in the meeting being canceled. Similarly, failing to confirm or attend your meeting will not absolve you of the requirement to prepare the necessary documents as requested. Instead, the IRS may simply proceed to the next step of the collections process, or send you a further notice regarding your meeting.

Part 13: Publications for Discussion

During your appointment, certain IRS publications will be presented and discussed. As well as information on the IRS collections process, you will also be informed about your rights as a taxpayer and your rights to appeal collection actions by the IRS.

It can be helpful to at least familiarize yourself briefly with some or all of these documents in preparation for your meeting. This can allow you the chance to consider the relevant details and present any questions you may have during this appointment.

These documents should be enclosed along with Notice 725-B. Alternatively, they can be found on the IRS website:

• IRS Publication 1, Your Rights as a Taxpayer
• IRS Publication 594, The IRS Collections Process
• IRS Publication 1660, Collection Appeal Rights

Part 14: Appointing a Representative

Lastly, Notice 725-B concludes with a further note on appointing a legal representative. This is a reminder that if you plan to appoint a tax attorney, CPA, or other relevant legal professional to your case, you are asked to complete and fax Form 2848 as soon as possible in advance of your appointment.

When the IRS Sends Notice 725-B

In most cases the IRS will send you Notice 725-B when one or both of the following scenarios apply to your tax account:

1. When the IRS believes you have failed to file one or more tax returns.
2. When the IRS has assessed an unpaid balance of taxes against you.

If your case is assigned to a revenue officer, it is likely that Notice 725-B will be their initial contact with you. Since most accounts start in the ACS, if an officer is assigned to your account that’s a good indication that the IRS is getting serious about collecting the debt you owe.

What You Should Do If You Receive a Notice 725-B

Here’s a look at the steps you should take if you receive IRS Notice 725-B:

1. Review the Notice Carefully

It’s vital that you take the time to ensure you understand the letter to the best of your ability. It doesn’t have to make complete sense, and it’s okay to have questions. But the more understanding you can gather from this document, the more confident you’ll feel when it comes to taking action and following the instructions provided.

Pay close attention to the details of your appointment, and also take note of any questions that arise from your initial review of the notice.

2. Prepare Your Documents

Whether you already have or intend to consult a tax professional to help you with your case, it’s a good idea to do what you can to prepare the documents that the IRS are requesting from you.

Even if you can’t complete everything, doing as much as you can here will help you build a good understanding of the full picture. This can also help accelerate your case if and when you do seek professional help.

3. Confirm the Appointment (or Reschedule)

Confirm the appointment as soon as you can, keeping in mind that you’ve got 10 days to do so from the date given in the top right hand corner of the letter. Ignoring this notice won’t do you any good, even if you’re simply unavailable at the designated time.

Your revenue officer will generally be open to rescheduling if you contact them promptly.

4. Consider Professional Representation

Experienced tax professionals, such as those on our team here at Choice Tax Relief, can help guide you through the process of preparing for and attending your meeting with the IRS and beyond, if necessary.

If you don’t feel comfortable handling this appointment on your own, or you would simply like to ensure that you are as well prepared as you possibly can be, then finding a qualified tax pro is recommended.

Don’t forget to complete and fax Form 2848 in advance of your appointment if you do choose representation.

5. Prepare for the Meeting

Whether you are being represented or not, it’s important to do what you can to prepare for the meeting at least a few days out.

In addition to gathering the relevant documents as listed in your notice, you should also take the time to review the enclosed documents and familiarize yourself with your case, and the IRS collection process, as much as possible before your meeting.