Eight Things to Know If You Receive an IRS Notice

From the IRS…

Did you receive a notice from the IRS this year? Every year the IRS sends millions of letters and notices to taxpayers but that doesn’t mean you need to worry. Here are eight things every taxpayer should know about IRS notices – just in case one shows up in your mailbox.

  1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
  2. There are number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
  3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.
  4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
  5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
  6. If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
  7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call, to help us respond to your inquiry.
  8. It’s important that you keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

  • Publication 594, The IRS Collection Process ( PDF)
  • Publication 17, Your Federal Income Tax for Individuals ( PDF)

The most important thing to know is no situation with the IRS ever got better by ignoring the problem. But the second most important thing is to make sure you understand the notice clearly. Some people get intimidated by IRS letters and quickly pay up whatever’s being requested. This strategy is almost as bad as the ignore-them-and-hope-they-go-away strategy.

The IRS makes mistakes. And you will not be penalized for defending a perfectly valid deduction or credit. I see notices every year attempting to assess additional tax based on inaccurate adjustments made by the IRS. If you believe the IRS is mistaken, then defend your position. Many additional “assessments” can be eliminated by providing additional paperwork. Of course, it’s always a good idea to get a second opinion from a competent professional to make sure your position is defensible. And if you feel at all uncomfortable dealing directly with the IRS, you can designate a professional (but only an Enrolled Agent, CPA, or Attorney) to represent you before the IRS by completing a Power of Attorney using Form 2848 from the IRS.

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