When you receive an IRS notice or letter in the mail, your first response is fear. Your gut clenches, your hands shake and you have an overwhelming feeling of dread. Every year the IRS sends out millions of notices and letters. This is how they contact taxpayers, not via threatening phone calls or sending emails demanding payment – those are scams! But the letters are very real, and can have serious consequences. So how do you respond? What do you do?
First, open the letter. If you have a Power of Attorney on file with the IRS, then your CPA or attorney has received a copy of this as well. It is not necessarily bad news! The IRS sends notices and letters for the following reasons:
- You have a balance due.
- You are due a larger or smaller refund.
- They have a question about your tax return.
- They need to verify your identity.
- They need additional information.
- They changed your return.
- They need to notify you of delays in processing your return.
Next, read the letter. Each notice or letter contains a lot of valuable information, so it’s very important that you read it carefully. If the IRS has changed your tax return, compare the information they provided in the notice or letter with the information in your original return. Remember, you could be the victim of identity fraud and these notices can help notify you if someone has filed a fraudulent return under your social security number.
How to respond? If your notice or letter requires a response by a specific date, there are 2 main reasons you’ll want to comply:
- to minimize additional interest and penalty charges.
- to preserve your appeal rights if you don’t agree with the IRS’s position.
If you owe taxes, pay as much as you can, even if you can’t pay the full amount you owe. You can pay online via your bank account or credit card, or apply for an Online Payment Agreement or an Offer in Compromise.
If you need help in resolving an IRS situation, call the number on your letter or notice. See what help the IRS can offer you first. If they can’t resolve your issue, contact your CPA or tax attorney. And hold onto that notice or letter! It’s important to keep a copy of all IRS correspondence with your tax records. You may need those documents at a later date.
