You were having a great day until you got home, opened your mailbox, and were greeted by the infamous letter from the IRS. Your heart skipped a beat and now you’re wondering what you did or didn’t do, or what you now have to do.
Click here to see an example of a letter you may receive.
Why You Received A Letter
As per the IRS website, you could receive a letter for any one of the following reasons:
- You have a balance due
- You are due a larger or smaller refund
- The IRS has a question about your tax return
- The IRS needs to verify your identity
- The IRS needs additional information
- The IRS changed your return
- The IRS needs to notify you of delays in processing your return
What to Do
Here’s what to do if you are one of the lucky ones who received a letter:
- Don’t panic – Although the IRS likely didn’t contact you to see how you’re doing or what you have planned for the weekend, the matter at hand could usually be resolved simply by responding to the notice in the given time frame.
- Make sure it’s legit – IRS scams are now being sent out by mail in addition to phone and email. Click here to see how to tell if your IRS correspondence is a scam. If you have any doubts or questions, contact the IRS to confirm that they did, in fact, send you a letter.
- Read carefully – Identify the issue, tax form, and tax year referenced. Try to understand the problem as best you can and read the instructions to see what they are asking for. Most letters are about changes to your account, taxes you owe, or a payment request.
- Review – If the letter indicates changes to your return, compare the changes in the notice to the actual return. Keep in mind – just because the IRS “changes” your return, does not mean that the changes are always correct. Sometimes the IRS makes changes without all the relevant info or documentation, which they may ask you for. (This was a test – if you didn’t notice that I skipped #4, repeat #3 and read carefully!)
- Make a decision – Decide whether or not you agree with the letter.
- If you agree, you usually don’t need to reply unless there are specific instructions to do so or you owe a payment.
- If you disagree, you must reply. Have your accountant write a letter explaining why you disagree and mail or fax it to the address at the top of the letter, along with any documentation that supports your argument. The letter will usually indicate a “reply before _______” date; respond by this date to avoid any additional interest or penalties if it turns out that you do, in fact, owe money. If you don’t hear back right away, that’s totally normal; it could take anywhere from 30-90 days (or sometimes even longer) to receive a response.
- Keep a copy for your records – No matter what you decide, you should always keep a copy of any correspondence, along with your responses, for your records. You may need to reference them at a later date if the matter is ongoing.
If you need additional details or have any questions regarding the letter, contact the IRS. They usually provide a phone number at the top of their letters. If you speak to an agent, only discuss the matter addressed in the letter; no need to open more doors for the IRS to walk through. You can also click here to learn more about your letter.
If you owe money, pay as much as you can, even if it’s not the full amount. The IRS will often work with you to set up a payment plan if you cannot pay all at once. You can pay by check, online at https://www.irs.gov/payments, or via the IRS2Go mobile app.
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Nick Aiola is a CPA located in New York, NY. Nick provides tax and accounting services to a wide range of clients, including individuals, businesses, and fiduciary entities.