Few things are more frightening than opening your mailbox and finding a letter from the Internal Revenue Service. You may wrack your brain wondering what you've done to receive an IRS notice. But there’s no need to pretend it didn't arrive or go on the lam.
Relax. The IRS sends out millions of letters each year for a variety of reasons. An IRS letter does not necessarily carry bad news – and if it does, ignoring it is not going to make the situation any better. Take a deep breath, resist the urge to panic, and follow these tips to help you get past your initial shock.
1. Read the Letter Promptly – Putting off opening the letter won't help you, and delaying can even cause you harm. In many cases, the IRS is simply seeking more information or clarification of some aspect of your tax return, which makes it time-sensitive by definition.
2. Check for Incorrect Information – Review the notice for any errors such as a misspelled name or an incorrect Social Security number and compare any noted corrections or changes in your return with your original submission. These could be simple mistakes, modifications to correct errors on your original return. It's quite possible you didn't consider one of the latest tax changes when you filed. Alternatively, the IRS corrections could be signs that someone has tried to send in a fraudulent tax return in your name. Protect your credit – protect your identity – protect yourself with a MoneyTips Premium membership.
3. Reply Promptly When Necessary – Not all IRS notifications require a reply, but when they do, it's important to reply quickly. Typically, you will have thirty days to respond. The only letter that requires a more urgent response is Letter 692 – Request for Consideration of Additional Findings, which notifies you of adjustments that the IRS would like to make to your tax return. This letter requires a response within 15 days.
Your response should be in writing, and you should retain copies of your correspondence, as well as any information that you send along with the correspondence – for example, proof of a particular deduction that you have claimed.
4. Address Any Required Payments – If you have underpaid your taxes and received a balance due notice, you must address the issue immediately in order to avoid penalties. If you can't pay the amount due immediately, you may qualify for additional time to pay or for alternative payment options such as installment agreements. Review your options in IRS Tax Topic 202 and contact the IRS to set up the payment options that work best for you. Failing to pay your taxes or a penalty you owe could negatively impact your credit score. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
If you believe the payment request is in error, you can attempt to resolve your dispute within the IRS Office of Appeals, or ultimately, in Tax Court. In any case, you need to resolve the issue as quickly as possible.
5. Seek Professional Help if Needed – If you are being audited or have a serious issue with the IRS request, don't try to handle it by yourself. Depending on the situation, you may need assistance from your tax preparer, a Certified Public Accountant, or even a lawyer. Make sure you and your professional are familiar with the latest tax requirements.
6. Keep all IRS Correspondence – Keep the IRS letter, along with any replies that you make, with your important tax records. You may need this information in case of future questions or disputes.
Keep in mind that real communications with the IRS will be made by traditional mail. The IRS will not use email or social media to contact you, or call you threatening to lock you up. Tax scammers often send notices by these methods, pretending to represent the IRS and demanding personal information, financial information, or payments by specific methods.
Don't let scammers fool you into releasing personal information – but conversely, don't ignore mail correspondence from the IRS on the assumption that it may be a scam. The worst thing you can do with an IRS notice is to ignore it… or blow town.
Protect your credit – protect your identity – protect yourself with a MoneyTips Premium membership.