Did you know the IRS sends millions of notices to taxpayers every year? And starting right about now, post-tax-season, the IRS is busily verifying the accuracy of returns and taking action on misreporting, underpayments, and errors.
But that doesn’t mean you need to worry. Many of these notices can be dealt with very simply, without having to be
frightened visited by an actual IRS agent.
Here are six quick things every taxpayer should know about IRS notices – just in case one shows up in your mailbox in the coming weeks.
1) Remain calm — but don’t ignore the notice either.
It’s easy and tempting to place that unopened piece of mail in the bottom of a pile somewhere and forget about it.
Many of these matters can be dealt with simply and painlessly — especially if you’ve hired a tax professional to represent you.
2) Receiving an IRS notice doesn’t necessarily mean you’re going to be audited, nor that you’ve done anything “wrong.”
There are many reasons the IRS sends notices to taxpayers, such as to request payment or simply gather additional information. The notice you receive normally covers a very specific issue about your account or tax return. Some of the most common notices are in regards to:
- Math errors
- Balances due
- Late filing penalties
- Estimated tax penalty assessments
- Missing returns
None of those issues will necessarily entail a full-blown IRS audit, and many can usually be handled in less than an hour’s time.
3) As I mentioned, each notice provides specific instructions on what you need to do to satisfy the inquiry. So….Do those things. 😉
But first, review the correspondence for accuracy. You do this by comparing what it says with the information on your return.
If you agree with the notice, usually no reply is necessary unless a payment is due.
If you do not agree with the notice, it’s important that you respond as requested. You (or your tax preparer, if s/he’s your appointed representative) should send a written explanation of why you disagree, and include any documents and information you want the IRS to consider. Add a cover letter with the year, tax form, and a list of attachments to all correspondence, and be very clear about what you’re requesting. Mail the information to the IRS address shown on the notice, and allow at least 30 days for a response.
4) There’s usually no need to call or visit an IRS office.
Most notices can be handled through the mail. But if you have questions, call the telephone number printed on the notice and have a copy of your tax return available when you call.
5) Respond quickly and before the due date.
It goes without saying (or it should) — Don’t miss a deadline with the IRS! For example, you must reply to a math error notice within 60 days or the adjustment is considered final, after which your only option is to file an amended return.
If the response requires documentation, send it well before the due date because the IRS tends to gets overloaded with correspondence processing. (Another reason why it’s important to open mail from the IRS right away.)
6) IRS notices and letters are sent only by snail mail.
The IRS does not correspond by email, text, or social media about taxpayer accounts or tax returns. If you receive an “IRS Notice” via email, it’s fake and probably a “phishing” attempt. In fact, “phishing” is listed as one of the Dirty Dozen IRS Tax Scams
for 2012 almost every year.
(FYI: Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity or financial theft. If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to email@example.com.)
For more information about IRS notices and bills, see Publication 594, The IRS Collection Process.
But hey! It’s not all about kowtowing to the IRS. You also have some rights as a taxpayer! And if you do receive a large “balance due” notice, there are many steps you can take before the IRS enacts a lien or levy. Talk with your tax adviser about your options.
(Photo by minwoo.)