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
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.
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.