Receiving a letter from the IRS can be a bit alarming for anyone. Once tax season has come and gone, the IRS starts sending out letters and notices to taxpayers.
If you’ve received mail from the IRS, don’t panic. Typically, there’s no need to worry.
They may just be reminding you of the balance due or asking for more information. No matter the reason, you shouldn’t ignore IRS letters.
Here’s a look at some types of IRS letters and what you should do if you receive one.
Reasons for IRS Notices
There are a variety of reasons the IRS may send a formal notice or letter via mail. Common reasons for IRS letters include:
- You have a balance due on your taxes
- Your refund amount differs from your tax returns
- The IRS has a question about your tax return
- They need additional information before processing your return
- They want to confirm your identity
- The IRS made changes to your tax return
- There will be a delay in processing your return
You should take a letter from the IRS seriously, but be aware. There are scammers who claim to be from the IRS.
They send fraudulent letters requesting personal or financial information. They often threaten recipients with legal action or jail time if they don’t respond at once.
If a notice seems suspicious to you, trust your instincts. Contact the IRS to verify whether the notice is legitimate or not.
If the IRS notifies you that you have underpaid your taxes, read the notice carefully. Decide whether you agree or disagree with their determination.
If you agree, it’s important to pay the balance by the required due date. It’s critical to act quickly to pay your taxes or work out a payment agreement with the IRS.
If you owe back taxes or aren’t sure about the next best steps to take, contact a tax professional for assistance.
Information Not Included on Your Tax Return
The IRS notifies taxpayers when they receive information that should have been included in their returns. When this happens, you may or may not owe more money on your taxes.
The IRS routinely receives tax forms from banks, employers, and other sources. The IRS notes any discrepancies between the information they receive and what you filed on your tax return.
They may send you a notice asking you to explain the discrepancy. At this point, you decide if you agree or disagree with their determination.
This begins the process of appealing or correcting the issue with your tax return.
Common Types of IRS Letters
There are over 75 different letters and notices the IRS sends to taxpayers. Generally, they fall into five different categories. These include:
- General letters
- Return requests
- Return errors
Here’s a closer look at the five most common IRS notices.
This is a return error notice from the IRS. You may receive this notice if the income you reported on your tax return doesn’t match what the IRS received from third-party sources. Another reason you could receive a CP2000 is if the IRS thinks you claimed certain tax credits improperly.
This notice isn’t a bill or an audit. Instead, it’s a summary of changes the IRS is making to your tax return.
A CP14 is a tax collection notice from the IRS. If you receive a CP14, you have an outstanding balance to pay on your taxes.
This notice includes a detailed summary of everything you owe, including any interest and penalties. It should list any payments you’ve previously made.
If you ignore an IRS notice, more will follow.
This is a collections notice. It’s a reminder of unpaid tax debt and that you want to take the necessary steps to take care of it as soon as possible.
Failure to comply and pay your taxes by the required deadline will result in repeated notices and an eventual levy notice.
This is an audit notice from the IRS. They send a C75 when they want additional information regarding your eligibility for particular tax credits, including the Earned Income Credit (EIC).
If you are to receive a refund, part of the tax credit in question can be frozen until you comply and provide the information the IRS is requesting.
You don’t want to ignore notice CP90 if you receive it. It’s a notice of Intent to Levy.
That means the IRS intends to seize your assets to settle your tax debt. It’s important to respond within 30 days of receiving this notice.
It also details your rights to a Collections Due Process hearing. This is an option for a hearing before the IRS takes over your wages, bank accounts, or property.
How to Handle Receiving an IRS Notice
It’s normal to be alarmed if you receive an IRS notice. But remember that ignoring it will only make matters worse.
Instead, be sure you understand the notice and take the necessary steps to address the situation. Here are the next best steps to take if you receive an IRS letter or notice.
You’ll find the letter or notice number in the top or bottom right corner of the sheet.
If you receive an IRS notice, don’t panic. Not all letters from the IRS involve bad news.
Most IRS notices deal with minor issues. In most cases, you can deal with the issue quickly and painlessly. The solution may only require a simple response.
Read the Notice Carefully
Every IRS notice contains specific information pertaining to your tax returns. It’s important to read the information carefully and understand what they’re asking you to do.
If they have changed something on your tax returns, compare the information in the notice with your original return. Be clear about whether they are simply informing you of a small change or if there was a serious issue with your tax return.
Each notice from the IRS will state what you need to do next. In most cases, if you follow their instructions, you can resolve the issue quickly.
Respond to an IRS Notice Promptly
Check your IRS notice to see if they requested you to respond by a specific date. If so, be sure to respond on time.
The three main reasons you should comply include:
- To eliminate or minimize any additional interest or penalties
- To prevent processing delays
- To preserve your right to appeal if you feel the information is incorrect
It’s important to reply in the manner indicated on your notice. They may want you to reply by mail, fax, or through the IRS Documentation Upload Tool via a unique access code.
Depending on the notice you receive, you may be required to complete a response form and send in any supporting documentation. If, for some reason, you aren’t able to do this within the timeframe given, you’ll need to contact the IRS.
Their phone number is listed on your notice. Failure to respond in a timely fashion could jeopardize your appeal if you plan to dispute the changes they made or the amount you owe.
The Importance of Your Response
If the IRS requests your response, it’s important to comply. They will take steps against you if they feel you’re not taking their responses seriously.
There are three ways the IRS could react if you don’t respond. These include:
- Continue correspondence with you, your attorney, or representative
- Request additional documentation from you or your company
- Impose penalties for delinquency or fines for non-compliance
Reply Only if Requested
There’s no need to reply to an IRS notice unless they instruct you to do so. In most cases, you won’t need to call the IRS.
In some situations, the IRS may request you to call. If so, be sure to have a copy of your tax return and your IRS notice handy.
Pay Your Taxes
When the IRS is involved, it’s essential to pay whatever you can if you owe back taxes. You can make a partial payment if you can’t pay the amount in full.
There are options if you miss the tax filing deadline. You can pay online or apply for an Offer in Compromise or an Online Payment Agreement through the IRS.
Speak to a tax professional about your options for paying your taxes.
Keep Your Documentation
If you receive an IRS letter or notice, keep a copy. You should have copies of anything pertaining to your tax records.
You may need these documents at a later time. It’s wise to have all your financial documents on hand in case you’re asked for more information or wish to file a dispute.
The IRS recommends keeping your records for three years or more after you file your tax return.
Let the IRS Know If You Have a Dispute
If you don’t agree with the IRS, send a letter explaining why you want to dispute the notice. You can send it to the IRS at the address included with the notice.
Be sure to include copies of any documents or information you want the IRS to review as they consider the validity of your dispute.
Take an IRS Notice or Letter Seriously
Keep in mind that you should never ignore a notice or letter from the IRS. Doing so could put you at risk for tax liens, levies, or wage garnishment.
The IRS won’t just go away. They will use any legal means necessary to collect your debt.
If you owe back taxes or aren’t sure about the next best steps to take after receiving an IRS notice, contact a professional tax service for a consultation.
If Your IRS Letter Arrives Late
If you receive a letter with a date to respond but the letter arrives too late, contact the IRS. Let them know you received the notice late and will need some additional time to respond.
This is especially relevant for overseas taxpayers. The IRS usually offers a one-month extension, so be sure to contact them right away.
Watch Out for Scams
The IRS doesn’t contact taxpayers via social media or text messages. If you receive correspondence in this form, it’s a scam, and you should ignore it.
If your letter seems suspicious, you can contact the IRS to check its authenticity. Generally, the IRS contacts taxpayers for the first time through the mail.
If you’re unsure what you owe the IRS, you can view your tax information on IRS.gov.
What If You Can’t Pay What You Owe?
Receiving a notice that you owe more taxes is often a complete surprise to the average taxpayer. You may worry and wonder what will happen if you can’t pay.
The IRS suggests that taxpayers who cannot pay the balance in full pay as much as possible. Unfortunately, this can leave you with additional interest and late payment penalties to deal with.
In these cases, taxpayers have the option to apply for a repayment plan called an Installment Agreement. If you’re approved for an IRS payment plan, interest will still accrue on the balance you owe.
Applying for a payment plan informs the IRS of your intent to pay based on an agreed schedule and terms. If you plan to take part in this type of payment plan, it’s important to stay on track with your current taxes.
If you don’t pay your taxes, the payment plan could go into default. This opens the door for the IRS to place a lien on your assets.
Get the Right Help If You Owe Taxes
No one wants to get a letter from the IRS. It can be alarming, but it’s usually nothing to worry about.
It’s important to know there are many types of IRS letters, and some are more serious than others. Unless you’re a tax expert, it’s in your best interest to consult a tax professional to ensure you resolve the issue quickly.
The tax resolution process can be complicated. You don’t want to try to handle it on your own.
At Polston Tax Resolution & Accounting, our tax professionals will perform a comprehensive analysis to find the right tax solutions for you.
Contact us today for a free comprehensive consultation.
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