Going out to a mailbox and finding an enveloped marked from the Internal Revenue Service can be a disturbing experience for many people the first time. It might mean and audit, an investigation, a penalty, or something worse; usually the most negative possibility often goes through a person’s head first. In reality, a notice from the IRS should be no surprise as a form of government communication. As one of the federal government’s biggest bureaucratic agencies, the IRS sends out thousands of notices a year, with many of them being basic, simple letters and a few being something more.
Here’s how to deal with a notice if you happen to be one of the special IRS recipients this year.
First off, don’t start panicking. That’s simply a lot of unnecessary anxiety that in most cases is not necessary. Instead, the first step to take is to simply open the notice somewhere where you won’t be disturbed for a few moments to fully understand the letter.
Second, try to understand what the notice was for. In most cases the matter is pretty clear. The IRS will state whether the notice is a request for more information, a determination additional taxes are owed, a requirement to attend a meeting or audit, or something else. However, if it’s unclear, the notice always provides an IRS agent’s name and phone contact to follow up and get more information about the communication. Have your related tax documents ready and nearby for easy reference when making a call.
Third, once you understand the instructions, follow them specifically unless you are going to dispute the matter. This is important as the IRS is very picky about deadlines not being followed. For example, if the IRS says a payment is due, and you agree, then make sure the send the payment as directed to the address included by the date specified.
Next, if the IRS states the notice is due to an error on a tax return, ergo an additional payment is due (the IRS is not required to volunteer their own mistakes or refunds), then compare the matter with your tax return records before responding. If the difference is small, even if you disagree, it’s usually smart to just pay the bill and be done with it. A dispute can often cost far more in time, mailing, travel and representation costs. However, if the difference is significant and you disagree, then you need to respond with the provided form on the bottom of the notice within the time allowed. Then, wait. It can take 30 days or more for the IRS to followup.
If and when the matter is closed, keep a copy of the notice and final decision with your affected tax return so everything is in the same location if needed later on.
Watch Out for Scams
During tax season as well as during the summer when most audits take place, scam artists will try to send fake IRS notices to get identity information or payments misdirected to them. The IRS will never handle a tax matter by email, and they will only send their notices by U.S. mail. Don’t respond to any scam asking for your social security number or payments by email to resolve a supposed tax problem.
The IRS goes to great effort to make its notices clear, both in writing and on the IRS website at www.irs.gov . So don’t let yourself go into an anxiety attack if you happen to receive a notice. Nine out of ten times the matter communicated can be resolved very quickly and easily. And there are plenty of resources to explain the next steps if the notice seems unclear on what the IRS wants or needs.