Each year the IRS sends out millions of letters and notices to taxpayers. While no one wants to be the recipient of IRS correspondence, most issues can be resolved without too much pain.
IRS notices are sent out for a variety of reasons -- from something as simple as requesting additional information to assessing additional taxes, penalties, and interest. The notice will explain the reason it was sent to you and provide instructions on what you should do to satisfy the inquiry.
If the IRS is making a change to a filing, review the information on the notice and compare it to the information on the return filed. In general, if you agree with the change, no reply is necessary. If there is a balance due, follow the instructions for making the payment. If you do not agree with the change, send a written explanation of why you disagree along with a copy of the notice and any documents supporting your position. Make sure you keep a copy of all correspondence, including attachments. The IRS will send a follow-up notice accepting your position, requesting additional information, or providing additional information on the reason for their position. The issue is not resolved until the IRS acknowledges your position and changes their records to reflect that no amounts are due or you accept their position and pay all outstanding tax, interest, and penalties.
Depending on the situation, the notice may be resolved by calling the IRS at the phone number in the upper right-hand corner of the notice. When you call, make sure you have all relevant information, including the notice. Resolving issues over the phone that require additional documentation is usually not practical. However, if you have a question on your notice you may be able to get an explanation by calling the IRS.
Regardless of the reason for the IRS notice, we recommend you respond as quickly as possible. It is unlikely that the issue will resolve itself without some action on your part unless the notice states otherwise. If you do not respond to a notice stating there is a balance due by the due date on the notice, the IRS may start collection procedures, which may make it more difficult to get the issue resolved. Even if no tax or penalties are involved, it is important that you respond to the notice appropriately. Any correspondence from the IRS should be taken seriously and addressed promptly.
Please note that the IRS does not initiate contact by email or any type of electronic communication about tax accounts or to request sensitive personal and/or financial information.
Let us know if you have any questions on IRS notices.
By Donna A. Hubert, CPA, Partner, dhubert@legacycpas.com