A preference demand letter is a notification that is sent by the Internal Revenue Service (IRS) to creditors or other parties who have received payments from a bankrupt debtor prior to the debtor’s bankruptcy filing. The letter requests that the recipient return any payments received from the debtor during the preference period, which is generally the 90-day period prior to the bankruptcy filing (or one year for “insiders” such as family members or business partners).
If you receive a preference demand letter from the IRS, it is important to respond promptly and seek the advice of a bankruptcy attorney or tax professional. Here is a preference demand letter IRS sample form:
[Your Name] [Your Address] [City, State ZIP Code] [Date]
Internal Revenue Service [Address] [City, State ZIP Code]
RE: Preference Demand for [Tax Year] Tax Return
Dear Sir/Madam,
I am writing to request a preference payment under Section 547(b) of the Bankruptcy Code for the [Tax Year] tax return. As a creditor in a bankruptcy case involving [Debtor’s Name], I believe that I am entitled to a preference payment for the amount of [Amount of Preference Payment].
The relevant information regarding the preference payment is as follows:
- The payment was made within the 90-day period prior to the bankruptcy filing.
- The payment was made for a debt that was owed by the debtor before the payment was made.
- The payment was made while the debtor was insolvent.
- The payment allowed me to receive more than I would have received in the bankruptcy case if the payment had not been made.
I have attached a copy of the relevant documents, including the bankruptcy petition, schedules, and statements, to support my request for a preference payment.
Please let me know if you require any additional information or documents to process my request.
Thank you for your prompt attention to this matter.
Sincerely,
[Your Name]
Failing to comply with a preference demand can result in legal action by the bankruptcy trustee to recover the funds, and may also trigger penalties and interest imposed by the IRS.
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