How to Handle an IRS Notice

One of the most dreaded pieces of mail to receive is one that has the return address: Internal Revenue Service.  While you should respond promptly to these letters, they aren’t usually anything to get too worked up over.  With some basic pointers, you should be prepared if one of these letters ever finds its way to your mailbox.  If you are working with a tax professional who includes notice response in their pricing, like we do, you can pass this off to him/her, but I still recommend trying to understand what the IRS is asking.

  • Read the notice carefully – be sure to identify what tax year and form this notice is regarding. There should also be a clear response deadline.
  • Compare to your records – the most common notices are due to discrepancies between the IRS’s records and the tax forms you filed. Pull out your previously filed return and compare what you reported to the information on the notice to identify the issue.
  • Prepare a response – based on what you discover when comparing your records, decide on an appropriate course of action. If you determine that the notice is correct, then send a check for the amount indicated.  If you disagree with the assessment, prepare a concise letter that explains your reasons and send in any necessary documentation.  Some types of notices include a response form you can complete.
  • Follow instructions – the notice will tell you how to respond, where to send your response, and the due date. The best thing you can do to avoid future notices is to simply follow the instructions.

By following these tips, you should be able to respond to your notice without a spike in your blood pressure.  This advice not only applies to the IRS but should also apply to any state taxing agencies that contact you.  It’s especially important to be aware that the IRS will always contact you by letter first, so if you receive a phone call or e-mail claiming to be from the IRS, it is probably a scam.

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