Summertime means the 2020 tax filing season is firmly in the rearview mirror for millions of Americans. But it also signifies the time when the IRS sends letters to unlucky taxpayers demanding more money!
If you receive a notice from the IRS, do not automatically assume it is correct and submit payment to make it go away. Because of all the recent tax law changes and the hurried implementation of those changes, the IRS can be wrong more often than you think.
These IRS letters, called correspondence audits, need to be taken seriously, but not without undergoing a solid review. Here’s what you need to do if you receive one.
- Stay calm. Don’t overreact to getting a letter from the IRS. This is easier said than done, but remember that the IRS sends out millions of correspondence audits each year. The vast majority of them correct simple oversights or common filing errors.
- Open the envelope! You would be surprised how often taxpayers 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 know what it is.
- Conduct a careful review. Review the letter. Understand exactly what the IRS is explaining that needs to be rectified and determine whether or not you agree with their findings. The IRS rarely sends correspondence to correct an oversight in your favor, but it can happen.
- Respond timely. The IRS will present you with clear instructions and a timeframe to resolve the issue. Do not ignore this information. Delays in responses could generate penalties and additional interest payments.
- Get help. You are not alone. Getting assistance from someone with IRS audit correspondence experience makes the process go much smoother. And remember, some of these letters could be scams from IRS impersonators, so having an expert review your letter is always a good idea.
- Correct the IRS error. Once you understand what the IRS is asking for, a clearly written response with copies of documentation will cure most IRS correspondence audits received in error. Often the error is due to the inability of the IRS computers to match documents it receives (for example 1099s or W-2s) with your tax return. Pointing out the information on your tax return might be all it takes to solve the problem.
- Certified mail is your friend. Any responses to the IRS should be sent via certified mail or other means that clearly show you replied to their inquiry before the IRS’s deadline. This will provide proof of your timely correspondence. Lost mail can lead to delays, penalties, and additional interest tacked on to your tax bill.
- Don’t assume it will go away. Until receiving definitive confirmation that the problem has been resolved, you need to assume the IRS still thinks you owe them money. If no correspondence confirming the correction is received, you should follow-up with another written confirmation request to the IRS.