IRS Notices and Letters, Do’s and Don’ts
If you’ve ever received an IRS notice or letter in the mail you’ve probably had a reaction similar to mine. When you first notice the envelope a twinge of fear skitters across the brain. You search your memories trying to see if there is something you forgot to report on your last tax return. After drawing a blank on your memory search, you open the envelope with trepidation and read through the jumbled jargon of IRS speak.
Now that you have a general idea of what the IRS notice is referring to your initial fear is replaced with annoyance that you have to deal with this, worry that you might have to pay more money and confusion because you are not exactly sure what to do next. Here are some important Do’s and Don’ts for dealing with these important letters.
DON’T
· Don’t ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do.
· Don’t panic. The IRS and it’s authorized private collection agencies do send letters by mail. Most of the time, all you need to do is read the letter carefully and take appropriate action.
· Don’t reply unless instructed to do so. There is usually no need for you to reply to a notice unless specifically instructed to do so. On the other hand, if you owe taxes you should reply with a payment. IRS.gov has information on payment options.
DO
· Do take timely action. A notice may reference changes to your account, taxes owed, a payment request or specific issue on a tax return. Acting timely could minimize additional interest and penalty charges.
· Do review the information. If a letter is about a changed or corrected tax return, you should review the information and compare it with the original return. If you agree, you should make the notes about the corrections on your personal copy of the tax return and keep it for your records.
· Do respond to a disputed notice. If you don’t agree with the IRS, you should mail a letter explaining why you dispute the notice. You should mail it to the address on the contact stub included with the notice. You should also include the information and documents for the IRS to review when considering the dispute. Make sure to allow at least 30 days for the IRS to respond.
· Do remember there is usually no need to call the IRS. If you must contact the IRS by phone, use the number in the upper right-hand corner of the notice. You should have a copy of your tax return and letter when calling the agency.
· Do avoid scams. The IRS will never contact you using a social media or text message. This is important and worth repeating, the IRS will never contact you using a social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure if they owe money to the IRS can view their tax account information on IRS.gov.
The IRS sends notices and letters for many different reasons. Some of the notices received are challenging the home office deduction, auto expenses or business meals taken for a small business. Other notices are related to gift taxes, missing W-2s or 1099s or any other information that the IRS received from another source that does not match what your tax return has on it. This is why we keep copies of support documents and it is often the strongest defense in a case with the IRS.
I have dealt with many IRS letters and notices for clients throughout the years and the majority of them have been resolved with little to no change to the client’s initially filed return. Often the IRS needs more information, documents supporting a claim or clarification on an item that conflicted with another filed return. In 2019 the IRS received over 141 million tax returns. This means that often these notices and letters are auto generated due to lack of information within the system and can be easily addressed by providing the information requested.
If you receive an IRS notice or letter please do not hesitate to reach out to me so that I can help. Don’t panic, you have someone here to help.