You checked your mail. Among the mail was an envelope with a return address that started with three words: Internal Revenue Service. Don’t panic. Receiving mail from the IRS is something millions of people experience every year. The IRS mails millions of notices and letters annually and there are many reasons the IRS mails notices and letters.
These IRS mailings can be divided into five broad categories:
- Account-related Notices. These notices are sent to advise you of a change to your tax return or to ask for more information about specific items on your tax return. Many times, the IRS can’t process a tax return with the information provided on the return and sends these notices to ask for more information.
- Collection-related Notices and Letters. These are generally bills for a balance due on a tax return account. These notifications provide specific amounts, payment due dates, payment mailing addresses and IRS contact information. These can arise from an unpaid balance on a tax return, a balance due as a result of a change to your tax account, including a tax penalty or a balance due after an audit has been completed.
- Audit-related Letters. These are letters advising you that a tax return has been selected for audit. The IRS uses the terms audit and examination interchangeably and the letter will refer to the return being “selected for examination.” IRS audits can be by correspondence, or they may be conducted at the local IRS office, at a business or residential location or at an accountant’s office. For audit notifications, the IRS will always mail a letter prior to making contact by phone.
- Penalty Notices. As the name implies, a tax penalty has been applied to a tax account. These penalties are asserted for many reasons including not filing a required return, filing a return late, a late payment, a penalty related to a discrepancy discovered during an IRS audit, etc.
- Filing-related Notices. The IRS database consists of millions of records about past return filings. When the IRS sees what appears to be a non-filed return, a notice requesting the filing of the required return may be sent. Not all of these notices are applicable as there are many reasons why a return is no longer required.
Some tips for handling IRS notices and letters:
- Open the envelope and read carefully. The letter or notice will contain specific information about why the letter was sent and what your options are.
- Respond timely. If the notice or letter requests a response, a specific response date will be provided. You will need to respond by this date. Failing to do so can result in losing the opportunity to provide additional information, losing the right to appeal or some other negative outcome.
- If you disagree with the notice, respond. Explain in clear language why you disagree. Many taxpayers engage a tax professional specializing in IRS representation involving federal tax controversy at this point, due to the complexity of the tax law. This is something you will want to consider, as tax professionals who handle IRS matters have extensive knowledge of IRS procedures and are very skilled at interacting with the IRS.
- Read audit notification letters closely. The letter will provide information about the location of the audit, audit appointment scheduling and the information to be reviewed. Correspondence audits will request information by mail. Office-based or field audit letters typically provide a specific appointment date or a phone number to call to schedule an appointment.Additionally, these letters may contain a request for the information that is needed for the initial appointment. Again, consider engaging a tax professional skilled in IRS practice and procedure. This individual can be authorized to handle all aspects of the audit for you including attending meetings and interviews, responding to information requests, responding to audit issues, disputing tax changes to your return, etc.
- Keep copies of all correspondence received from and sent to the IRS. These can be of great value in responding to subsequent notices and letters.
The IRS sends letters and notices by mail but the IRS does not contact people by e-mail or social media to ask for personal or financial information. In conclusion, there is no need to panic if you receive a letter or notice from the IRS. Read it closely, respond timely with the requested information, keep a copy for your records and consider hiring a tax professional when needed.
Bennett Thrasher LLP has a Tax Controversy Practice that helps clients resolve IRS matters prior to the litigation stage. This includes helping clients manage IRS tax disputes involving both field and correspondence audits; post-audit issue resolution, including representation in IRS appeals; penalty and collection notices; claims; and other tax compliance-related matters. For more information contact James Pickett, Director of Tax Controversy, by calling 770.396.2200.