We receive this type of call about once a week. To most taxpayers, a letter from the IRS means the world as they know it just came to an end…but we can assure you that scenario isn’t likely. However, don’t ignore these notices. Most people don’t receive IRS letters very often, perhaps once over many decades, and some basic responses are appropriate. Here’s a checklist for you to follow:
- Don’t panic. Generally, these notices are routine and often easily resolved.
- There’s no assumption the IRS is correct—sometimes it received an information document that was missed on your return. And if the IRS is wrong, it can be easily corrected.
- Read the notice carefully and completely. Often taxpayers read only the first page of the notice and think, “How did this happen?” We really need to see the entire notice to effectively evaluate where the problem lies.
- Note how, where and when to respond. These letters are often computer generated, yet the response must be read by a human being. Therefore, it’s important the IRS receives a response within its timeline to maximize the strength of your defense.
- If you agree, no response is necessary, unless the notice is in the form of a bill. In that case, the sooner you pay any tax due, the sooner the penalties and interest accrual stop.
- If you don’t agree, the response needs to:
- provide a clear explanation of where the IRS is wrong, and
- include appropriate documents to support your position strongly.
- If you partially agree with the IRS’ position, but not entirely, an amended return is often the best way to respond. The IRS can easily see what the changes should be. Again, it’s important to document why your amendment has the right answer.
- Generally, calling the telephone number on the notice is a frustrating experience as the wait time is long and explaining your situation verbally can be difficult. Obviously if you’re approaching a response deadline or you’re dealing with a second or third notice where enforcement action is pending, the phone may be the only practical method for responding. We also don’t recommend going to anIRSServiceCenter, as they’re usually only equipped to answer basic tax preparation questions. The correspondence you received came from a largeServiceCenterin another state, and they’re trained, although at different levels of expertise, to handle these specific types of adjustments.
- Keep copies of all documents going and coming during the correspondence exchange, and a log of what each party has done. This record can be critical in the not-too-infrequent situation where the IRS can’t find your past replies.
- If you want us to handle the matter for you, we need an executed power of attorney on this specific return to have any authority to represent you. Due to privacy policies, the IRS, or any other taxing authority, can’t provide any information or act on any conversation from us, without the power of attorney.
- If we can’t get satisfaction using these procedures we can either appeal the IRS decision or seek relief from the Tax Advocate’s Office, but these approaches are not available until we’ve followed the basic rules first.
The Internal Revenue Service, Department of Revenue, or local Tax Collectors are agencies just trying to do their jobs, regardless of how unpleasant the experience may be. A courteous approach to these problems will generally yield a reasonable result.
Patrick & Robinson CPAs is here to help, first, by minimizing the risk of these matters occurring and, second, streamlining the remedies when they do occur.
Let us know if we can help: Office@CPAsite.com or 904-396-5400.