Despite the modern world of technology, the Internal Revenue Service still very much follows an old-fashioned method of notifying people of further instruction or meetings requires via paper notices sent by regular mail. Dubbed “IRS notices” these communications can cover the gamut from approval of an Employer Identification Number to a request for documentation to an actual audit. As a result, the most important step a person can take when receiving an IRS notice is to read it carefully before doing anything else.
The Notice Basics
An IRS notice will often follow a specific format, and each component provides and important piece of information. These components include:
- The subject matter or topic the notice is about.
- The date the notice was sent.
- The date a response is due back to the IRS.
- The IRS agent or contact person to call for questions and that person’s phone number.
- Any specific requirements for next steps such as a payment amount due, documents requested or required, or where a meeting will take place and when.
- Any closing information specific to the notice matter.
Every one of these elements provides important information that should not be ignored. In fact, in 9 out of 10 notices, the IRS usually specifies how to resolve an issue or request in a few simple steps.
How to React
The first step when receiving an IRS notice is to avoid panicking. A notice doesn’t automatically mean a person is being audited. Second, the recipient should read the notice thoroughly and make sure the instructions are clearly understood. If there are any questions, the contact number on the notice will provide a trained IRS contact who can explain what is needed or why the notice is sent. It’s a smart idea to have the relevant tax return on hand when calling the IRS.
If the notice is simply for information, i.e. the IRS found a minor issue on a tax return and corrected it but nothing else is needed, then that’s it. There’s nothing more a recipient has to do. However, if the notice says a payment is due, and the dollar figure is fairly small, it’s better to just send in the payment with the notice and be done. This is a typical IRS approach called a desk audit when it finds a simple, low dollar error. Trying to appeal the issue can quickly cost far more, and interest and penalties can increase in the meantime.
However, if a response is needed, then the notice will state how an appeal needs to be made. It’s important to file a response by the deadline or the response is essentially waived. The IRS in most notices usually allows 30 days to response if there is a dispute of the notice.
The notice or a copy of it in any instance should be kept with a relevant tax return for good record-keeping. A later issue may come up and having the notice and related response on hand can avoid stumbling by memory instead.
eSmart Tax provides complimentary CPA Audit Assistance to all who choose eSmart Tax to file. If you receive a notice from the IRS, a Liberty Tax Service CPA can help you understand, prepare, and guide you through the audit process .