If you receive an envelope from the Internal Revenue Service (IRS) that does not contain a refund check, your heart rate likely increase. Before you fret, remember that most of the issues in these letters can be dealt with simply and painlessly.
Here are a few of the reasons why the IRS may be sending you a letter and what to do next:
There are a number of reasons the IRS might send you a letter such as
Generally, many of these letters are errors or issued due to a misinterpretation of facts – not a detriment to you or your business.
If you received a letter, perhaps you overlooked an item of income or the reported amounts on your return doesn’t match other IRS documents. It is also possible that someone else is using your SSN or is claiming your child as a dependent – among many other possibilities.
A notice from the IRS covers a specific issue about your account or your tax return. This notice should offer specific instructions on what you need to do to satisfy the inquiry. Since the law requires that these letters advise you of your rights and other legal information, they can be very lengthy and difficult to understand. So, if the IRS sends you a complicated and confusing letter, scan and send a copy to your bookkeeper or accountant so that they can review and handle it accordingly.
Ignoring the letter or message will not make it go away; you’ll just end up getting more notices. As you might expect, each succeeding letter will become more aggressive and more difficult to deal with as time progresses. Procrastination will only make the situation worse.
If the letter says that you owe money, don’t automatically pay the amount the IRS is requesting unless you are positive it is correct. More often than not, taxpayers do not actually owe the billed amount, and it is quite difficult and time-consuming to get a refund should you make the incorrect payment.
As letters from the IRS are important and time-sensitive, it’s important to check the letter immediately for a due date. This due date will tell you how long you have to react to the letter, whether that’s consulting an accountant to ensure you’re paying the correct amount or paying the fee right out.
If you move, make sure you’ve notified the IRS (and your state) of your change of address as soon as possible. Relying on the IRS to be aware of your change of address by checking your annual tax return is not enough, especially if your return is on an extension or you are a few years behind.
When moving, the IRS provides Form 8822 for taxpayers who have relocated between tax filings.
You might not like to receive correspondence from the IRS, but, as mentioned before, it is always easier to deal with the first notice than to wait. The complications can only increase when notices go unanswered. Should you have any questions about IRS correspondence, please do not hesitate to reach out to us. We handle this all the time and are glad to help decipher what exactly is needed. If you have any questions, set up a meeting with us to discuss the best course of action. For more tips and information, check out our other resources.