Given the complexity of the U.S. tax system, it is not surprising that most taxpayers fear IRS on some level. Many of our clients are often overwhelmed by the idea of having to deal with a tax issue, no matter how simple. If you happen to receive a letter or notice from the IRS, to quote the Hitchhiker’s Guide to the Galaxy, don’t panic. The IRS’s primary method of corresponding with taxpayers is through the mail, which is safer and more verifiable than any other method of contact. Here are some tips for dealing with IRS correspondence:
- Open it! The biggest trouble our clients face is from not opening mail from the IRS. Reviewing IRS correspondence is vital to understanding what is happening with your IRS account and what should be done for a speedy resolution.
- Read the letter thoroughly and determine whether action is required. IRS correspondence will tell you the reason for the letter, what action you are expected to take, and what rights you may have. For example, sometimes the IRS finds a simple math error on your tax return and, after correcting the mistake, additional tax and interest is due. By timely paying the amount due from the mistake, you can resolve the issue right away. Other times, the IRS requests information from you to verify that the figures listed on your tax return are correct. By providing the requested verification, you can often alleviate the IRS’s concerns. Some notices are purely informational and require no response. If the notice warns you that the IRS is taking or may take collection action against you, such as filing a tax lien or issuing a levy, you should pay particular attention to what the notice says should be done to prevent collection. In most cases, you may have a limited time in which you can contest the IRS’s collection activity, and you should pay attention to any listed deadlines.
- Compare the IRS letter with your tax return. If the IRS letter proposes a change to your return, compare the two to determine the reason for the proposed adjustment. If the comparison indicates you made a mistake, the IRS letter gives you a date by which you should pay the balance due before additional penalties and interest accrue. If you believe the IRS made a mistake, you usually have an opportunity to contest the IRS’s determination within a limited period of time.
- Respond timely and thoroughly, if necessary. If you disagree with the IRS’s letter, you may respond in writing or by phone. Putting your response in writing and mailing via a traceable method will document your complaint should any dispute arise. You should also follow the instructions on the letter regarding where to mail your response and what information your response should contain. You should explain thoroughly the reasons why you disagree and include documentation to support your position, if available.
- Keep the letter and wait. The IRS often takes 30 days or longer to respond to taxpayer letters. In the meantime, you should retain all IRS correspondence and continue to respond to any additional notices received if necessary.
- Stay Current. Compounding a problem with additional delinquencies can only make things worse. Keep up with your payment and filing obligations even if you have past due issues.
- Know when to seek professional help. If you feel overwhelmed or confused by IRS letters and notices, a tax professional such as a CPA or tax attorney can assist you with managing correspondence and responding where appropriate. A tax professional can explain the IRS correspondence in a manner you will understand and identify your options. Granting a tax professional Power of Attorney can also take the stress away from having to communicate with the IRS as they must speak with your agent if you select one. Click on the “Team” link above to find a tax professional to assist you.
Sandra Mertens
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