BGBC Partners, LLP Tax Update: How to Respond to a Tax Notice
The dreaded Tax Notice from the IRS! It’s the one piece of mail many taxpayers find absolutely terrifying to receive. In this segment of our Tax Update we will recommend the steps you should take to help you get through the process quickly and as pain-free as possible!
Now that the April 18th tax deadline has passed and the summer months are on the horizon, the season of tax notices has started to take place. The IRS and state tax authorities send millions of letters and notices to taxpayers each year, beginning shortly after the April 15th tax filing deadline ends.
At the outset, it’s important to emphasize that many of the issues presented in these notices are easy to resolve, and in some cases, are not even issues. Some of the most common reasons for receiving a tax notice include:
1) Having a balance due
2) You are due a larger or smaller refund
3) There is a question about your tax return
4) The government needs to verify your identity
5) Additional information is required
6) The return has been changed
7) Notification of delays in processing your return
If the reason for the notice is to inform you about a correction to your tax return, your first step is to review the letter carefully and compare the changes that were made to the original return that was filed.
If you agree with the corrections that were made, you will usually not be required to reply to the notice unless an additional tax payment is due, or other payments are needed such as late penalties and interest.
If you do not agree with the proposed changes to your return, you will need to respond to the IRS or state taxing authority in writing, and provide an explanation of your reasons for disagreeing with their corrections. In addition, you might also need to provide documents and other information to support your position. Once you finalize your response, mail the information to the IRS address indicated on the notice preferably using certified mail to support your timely compliance with the notice’s deadline. Allow at least 30 days for a response from the IRS to be received.
If after sending in a response, you receive an additional notice of tax due, you should call the IRS or state tax agency to confirm that your documentation was received. If it was received, but the IRS or state agency disagree with your response, you are then in a pre-Appeals phase of the process. If you want to continue the battle, make sure you comply with all deadlines on future notices, and look for instructions on each notice for the steps the agency has issued for continuing the Appeal.
In most instances, you will not need to call or visit an IRS or state agency office to resolve your notice. Most notices can be resolved through written correspondence as outlined above. However, there is usually a telephone number somewhere on the notice (be forewarned though, the wait times can be excruciatingly long so have some great reading material nearby). Before calling make sure to have a copy of your tax return and the notice available. Also, make sure to keep a copy of the tax notice and any other correspondence as you may need to refer to it later.
If you do need to respond, you may want to contact an experienced CPA to assist you. An experienced CPA can assist you in interpreting the laws, rules and regulations affecting the tax issue at hand. Furthermore, a CPA isn’t as emotionally invested in the situation as you are, so it is easier for them to make objective and rational decisions throughout the process.
Remember, most of these notices are easily resolved. Get through the process as quickly as possible so that you can get on with living life without a cloud hanging over your summer!
