A Preference Demand Letter IRS is a letter that demands payment of taxes owed by a taxpayer. This letter is sent to creditors of a taxpayer who filed for bankruptcy and made payments to the creditor within 90 days of filing for bankruptcy. In this article, we will explain the need for a Preference Demand Letter from the IRS.
What is a Preference Demand Letter?
A Preference Demand Letter is a letter sent by the IRS to a creditor of a taxpayer who filed for bankruptcy and made payments to the creditor within 90 days of filing. This letter demands payment of the amount of the payment made to the creditor within 90 days.
Why is a Preference Demand Letter Necessary?
A Preference Demand Letter is necessary to ensure that all creditors of a taxpayer who filed for bankruptcy are treated equally. The letter demands payment of the amount paid to the creditor within 90 days so that the payment can be added to the pool of funds available to all creditors.
The purpose of a Preference Demand Letter is to prevent creditors from receiving preferential treatment over other creditors. If payments are made to certain creditors within 90 days before a bankruptcy filing, these payments are considered preferential. The IRS demands payment of these preferential payments through the Preference Demand Letter so that they can be added to the pool of funds available to all creditors.
How to Respond to a Preference Demand Letter from the IRS
If you receive a Preference Demand Letter from the IRS, it’s important to respond promptly and accurately. Here are some tips for responding to a Preference Demand Letter:
- Review the letter carefully and make sure you understand the amount being demanded and the reason for the demand.
- Gather all documentation related to the payment in question.
- Consult with a tax professional or bankruptcy attorney for guidance on how to respond to the letter.
- Respond to the letter within the timeframe specified in the letter.
Conclusion
In conclusion, a Preference Demand Letter from the IRS is necessary to ensure that all creditors of a taxpayer who filed for bankruptcy are treated equally. The letter demands payment of preferential payments made within 90 days before a bankruptcy filing so that these payments can be added to the pool of funds available to all creditors. If you receive a Preference Demand Letter from the IRS, it’s important to respond promptly and accurately.
