Do you get that sinking feeling in the pit of your stomach when a letter arrives from the IRS? If so, you’re far from alone. The good news, however, is that letter is probably nothing to worry about.
When you get a letter from the IRS,
1. Open the letter.
The first (and biggest) mistake you can make is to toss the letter away without opening it. Never ignore correspondence from the IRS. While most of the letters they send out are not cause for concern, ignoring them can create big problems. Depending on the purpose of the letter, failing to ascertain its contents could result in potentially sizable costs.
2. Remain calm.
An IRS letter may state an amount due that is in conflict with what your tax preparer had calculated. Often, however, all that is needed is for your tax preparer to send additional documentation to the IRS to support the return as it was filed. While seeing an “amount due” when you think you’ve paid your tax bill in full can be unsettling, keep in mind that the first correspondence you receive on the matter from the IRS won’t represent a final determination.
3. Give the letter to your tax professional.
After you’ve read the letter, take it to your tax professional so they can respond appropriately on your behalf. Your tax preparer should be able to answer any questions you may have about why you received the letter and what, if any, effect it is likely to have on the amount you owe. If you’re having your taxes prepared by a professional firm that reviews returns multiple times before submission, then errors on your return are unlikely to occur.
What if you don’t use a tax professional?
If you don’t work with a professional tax preparer, then you’ll need to take matters into your own hands. If your letter indicates that your return has been changed, review the information carefully. If you agree with the change, simply make a note of it on your personal copy of your tax return and keep it for your records. If you are unsure what a particular notice means, you can call the IRS number printed on the letter for assistance.
If you see an amount due, this doesn’t necessarily mean that you need to pay it right away. Read the notice carefully so you understand its exact instructions. It may be that you need to provide documentation to support the amount you reported owing or being owed on the return that you filed. If so, mail any necessary supporting documentation to the address printed at the bottom of the letter. The IRS may take up to 30 days to respond.
Scammers are perpetually impersonating IRS agents to gain access to their victims’ money and/or personal information. The IRS will not threaten to call immigration or other law enforcement officials to arrest you for failure to pay, and the IRS has no authority to revoke any licenses you hold or alter your immigration status. For more information, see these tips from the IRS on how to know when you’re dealing with a real agent.
Aside from phone and email scams, thieves also sometimes send very convincing-looking letters demanding payment. A proper IRS letter will not demand payment by check written to any party other than the U.S. Treasury or by debit or credit card over the phone. See this Forbes article for information on the latest fake IRS letters making the rounds.
At Boelman Shaw Tax and Financial Planning, we review each tax return three times before sending it to the IRS to ensure the highest possible level of accuracy. By providing expertise in both tax and financial planning, we work to get the best combined benefit of investments and tax incentives for our clients. Click the link below to access our free resources for more information about tax and financial planning.