So you just got an IRS letter! Now what?
Every year, the Internal Revenue Service (IRS) mails out millions of written notices to taxpayers, including businesses and individuals. Correspondence takes many forms and involves a number of different requests. Some are simple information requests, such as a copy of a 1099 you may (or may not) have received or a request for more information regarding a specific deduction. Other notices require preparation, such as failure-to file-notification, or an audit notice.
The Taxpayer Advocate Service, an independent organization within the IRS, notes that the most common notice the IRS mails to taxpayers is the IRS Form CP14, which is a notice of underpayment of taxes. By law, the IRS is to send notices within 90 days of tax deadline to individuals that may have underpaid their prior year taxes. These letters inform the taxpayer that they have a balance of more than $5 on their account.
Did you receive a CP14 notice? If you did, it is important to read the notice carefully, as the payment shortfall may be the result of several different actions. You may have neglected to pay the full amount due, or simply made a math error. Or, there may be a penalty, a filing error, or a deduction or credit that has been disavowed for some reason.
So, what do you do?
Well, if the amount you owe seems appropriate to you and you want to pay it, the solution is fairly simple. There are instructions on the form for sending what you owe. On the other hand, if you have questions regarding the underpayment, or dispute the amount, you need to contact the IRS promptly.
However, before you reach for the phone, you may want to reach out to a professional to make that contact on your behalf. Why? Because a tax professional knows how to talk to the IRS in order to extract the best outcomes for you. Conversations with the IRS are rarely simple, and can quickly become thorny. Say the wrong thing, ask the wrong question or get upset and your simple issue may become a larger problem. The same result goes for anyone who ignores a notice. Your professional will act as your advocate, to confirm what is being claimed, calmly dispute any claims, and negotiate the best solution for you.
Most disputed claims need to be answered by mail with the IRS within 30 days, and may require a copy of your return along with any other documentation, including a copy of the IRS notice.
Don't Wait
Here’s the thing: even if you agree with the notice, speed is important. Delaying payment or response—even if you are not disputing the notice—may cost you in penalties and interest that keep rolling until you pay in full.
But don’t panic. Many notices are for information, and if they don’t require a response, you should not reach out to the IRS, simply follow the instructions on the notice.
One last piece of advice: Beware of scammers! If you receive an e-mail that looks like the IRS, be very wary of the sender. The IRS almost exclusively uses the US Postal Service. If the email you receive has an odd email address that is not a .gov address, it is a fake. Never send money to a notice with a link—in fact, don’t even click that link—as it is like a phishing scheme. Also, look carefully at (and keep) the outer envelope of the notice to verify it really came from the IRS and not some fraudster.
If you recently received an IRS notice and have questions or need help, please do not hesitate to reach out to us for assistance.