When you go to your mailbox and find you have received an IRS letter or notice, you may be stricken with panic and fear. However, the IRS sends out millions of letters and notices to taxpayers annually due to various reasons and situations. While it's possible you could be facing a serious financial situation, most letters and notices can be handled without you ever having to visit an IRS office in person. Should you receive an IRS notification letter, here's what you need to know.
Why You Might Receive a Notification Letter
As stated earlier, the IRS sends out notification letters for many different reasons. Some of the most common include informing you of a balance that is due, being due a tax refund that is either larger or smaller, needing to verify your identity or other important information, or having questions about your tax return. In some situations, you may receive a notification letter because the IRS is informing you that the agency changed your tax return, or that there will be a delay in processing your return. Whatever the reason, if you have questions that need to be answered as quickly as possible, it is best to schedule a meeting with your CPA and let them look over the letter to see what steps need to be taken next.
Read the Letter Carefully
Whenever the IRS sends you a notification letter, be aware that it will contain valuable information and should be read over very carefully. For example, if the IRS sent you a notice telling you it changed your tax return, compare the information provided in the letter with that which is contained on your original tax return.
Explaining the Reason for the Notification
As you read the letter, it will explain why it was sent and provide you with instructions as to how you should proceed. Should your letter ask that you respond by a certain date, do so. If you fail to comply, you may find yourself facing additional interest charges and penalties, and losing your right to appeal the agency's decision about your tax matter.
An Individual Reply May Not be Needed
Most of the time when letters such as these are sent to individuals, the good news is that the IRS rarely requires that you reply to the notification. If you agree with a correction made by the IRS or other things stated in the letter, you won't need to reply. However, if your letter states that a payment is due to the IRS or you are given instructions to reply, don't ignore the instructions. In cases such as these, it is probably best if you meet with your CPA to discuss your situation and learn of various options you may have to resolve the matter.
Respond Even if You Disagree
Even if you disagree with a correction made by the IRS, respond to the letter as soon as possible. When you do, include a written explanation as to why you disagree, any documentation you want the IRS to consider regarding your case, and don't forget the tear-off portion on the bottom of your letter. Upon mailing it to the IRS, expect to wait at least 30 days for a reply.
Pay What You Can
If the IRS is demanding payment, pay as much as you can as soon as you can. If you can't pay the total amount, you can apply for an Online Payment Agreement or Offer in Compromise, both of which will help you avoid or reduce your penalties. Since this can be a complex matter, it may be best to turn this over to your CPA.
No Office Visit Required
Fortunately, most IRS correspondence can be resolved without having to visit an IRS office in person or even making a phone call. But should you need to speak to an IRS representative, call the phone number in the notice's upper-right portion. When you do, make sure you have a copy of your tax return and the letter sent to you by the IRS.
Keep Copies of Everything
When you get an IRS notification letter, immediately make sure you keep it in a safe place with your tax records. Depending upon the situation addressed in the notification, you may need to reference the letter, your tax returns, and other documents in the coming weeks or months.
The IRS Does its Business by Mail Only
When it comes to taxpayer accounts or tax returns, the IRS does not ever use email to send you a letter or notification about anything. Instead, it relies on the U.S. Postal Service to deliver its notification letters to taxpayers. Therefore, if you think your letter looks suspicious, you get emails claiming to be from the IRS, or you go online to the IRS website and get no search results regarding a letter or notice, you need to take action immediately. Due to the possibility of identity theft, call the IRS at 800-829-1040 or report your issue on the Report Phishing page found on IRS.gov as quickly as possible. If you do need to report anything, always include the notice or letter number found on the correspondence.
A Contact Phone Number is Always Provided
Since it is always possible you may need to respond to a notification letter or have questions about the information it contains, any IRS correspondence you receive in the mail will have a contact phone number for you to call if necessary. In most cases, it will be located in the letter's top right-hand corner. But remember, you should only need to contact the IRS if you have a balance due, need to send the agency additional information, or you disagree with the contents of the letter.
Should you be holding an IRS notification letter in your hand, it is important you get answers to your questions before moving forward. Therefore, meet with your CPA so that they can look over the notification letter, explain your options, and give you advice you can trust.