What’s the one thing that is worse than doing your taxes? Receiving a tax notice from the IRS. We all hate them and many of us are even scared of them. I want to talk with you today about what to do if you receive a tax notice. I know it can be scary when you receive a letter in the mail from the IRS but this shouldn’t be the case. Unless of course you’re evading taxes, then I would be worried!
Why did you get a notice?
The IRS sends out tax notices for many reasons. You may owe additional taxes or need to provide additional information about your tax return. There is also the rare case that they are sending you a letter to inform you of an additional refund. I wouldn’t hold my breath on getting one of those but it does happen.
So you receive a notice, what do you do next? First off don’t panic. Many times these notices have easy answers and it takes a very simple letter to clear up and close-out the issue. You typically have 30 days to respond to your notice so don’t throw it in the drawer forget about it. Also, make sure you check the tax year at the top of the notice. It is not always related to your most recent tax return.
Should you respond?
If you’re absolutely positive that what they’re asking for is correct, then you can either pay the additional tax they’re looking for or respond with the proper information. However I would highly recommend speaking to a tax professional just to be certain you are correctly responding. I can tell you from first-hand experience that I have seen plenty of tax notices claiming the taxpayer owed thousands of dollars when in reality they didn’t owe anything. So just be very careful.
Once you do all your due diligence either by yourself or with the tax professional there are two things you can do. If you agree with the notice, follow the instructions and provide them with a check or any additional information that they’re looking for. If you disagree with the notice, write them a letter explaining your case. Make sure to include any supporting documentation that might help.
In summary, the two biggest things you want to remember are not to panic and speak with a professional. Unless you’re absolutely certain that the notice is correct I would not send a check without speaking to someone first. Many notices are incorrect or put the onus on you to prove items on your taxes. If you see some crazy amount owed and you have no idea why, there’s probably a good chance that there’s an error.