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Don’t Assume It’s Correct Just Because It’s the IRS

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You may receive correspondence from the IRS that contains an error. What should you do?

Here are some quotes from actual IRS correspondence received by clients:

“Our records show we received a 1040X…for the tax year listed above. We’re sorry but we cannot find it.”

“Our records show you owe a balance due of $0.00. If we do not receive it within 30 days, appropriate collection steps will be taken.”

“Payment is due on your account. Please submit payments on or before June 31 to avoid late payment penalties and interest.”

It’s pretty tough to pay a balance due of $0.00 or submit a payment on June 31 when June has only 30 days. The message should be clear. If you receive a notice from the IRS, don’t automatically assume it is correct and then submit a payment to make it go away. The same is true for errors in any state tax agency notices. They are often in error. So what should you do?

Stay calm. Try not to overreact to the correspondence. This is easier said than done, but remember, the IRS sends out millions of notices each year. The vast majority of these notices attempt to correct simple oversights or common filing errors.

Open the envelope. You’d be surprised how often clients are so stressed by receiving a letter from the IRS that they cannot bear to open the envelope. If you fall into this category, try to remember that the first step in making the problem go away is to open the correspondence.

Review the letter. Make sure you understand exactly what the IRS thinks needs to be changed and determine whether or not you agree with their findings. Unfortunately, the IRS rarely sends correspondence to correct an oversight in your favor, but it sometimes happens.

Respond in a timely manner. The correspondence received should be very clear about what action the IRS believes you should take and within what timeframe. Ignore this information at your own risk. Delays in responses could generate penalties and additional interest payments.

Get help. You are not alone. Getting assistance from someone who deals with this all the time makes going through the process much smoother.

Correct the IRS error. Once the problem is understood, a clearly written response with copies of documentation will cure most IRS correspondence errors. Often the error is due to the inability of the IRS computers to conduct a simple reporting match. Pointing the information out on your tax return might be all it takes to solve the problem.

Certified mail is your friend. Send any response to the IRS via certified mail. This will provide proof of your timely correspondence. Lost mail can lead to delays, penalties, and additional interest on your tax bill.

Don’t assume it will go away. Until you receive definitive confirmation that the problem has been resolved, assume the IRS still thinks you owe the money. If you don’t receive correspondence confirming the correction, send a written follow-up.

IRS file

What You Should Do When the IRS Contacts You

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Has the IRS questioned something on your tax return? Ignoring it is not the proper course of action.

After you file your tax return, the last thing you want to see is a notice from the IRS questioning your return. Some IRS notices involve very minor changes, like a correction to a Social Security number. Some are for serious changes that could involve a lot of money, such as a billing for more taxes, interest, or penalties due for an adjustment to your total tax liability.

So, what should you do if you get a letter from the IRS?

Here is a list of do’s and don’ts concerning contact from the IRS.

  • Don’t ignore the notice; the problem will not go away.
  • Act promptly. A quick response to the IRS may eliminate further, more complicated correspondence.
  • If you agree with the IRS adjustment, you do not need to do anything unless a payment is due.
  • If the IRS is requesting more money or a significant amount of new information, be sure to contact your tax preparer immediately.
  • Always provide your tax preparer with a copy of any IRS notice, regardless of how minor it appears to be.
  • Keep a copy of all the IRS correspondence with your tax return copy for the year in question.

Often taxpayers experience anxiety when they receive correspondence from the IRS. Don’t worry. The most important thing to remember is not to ignore the IRS. Bring any notice you receive to our office and let us assist you in resolving the problem quickly.