Imagine you come home from work after a very busy day, the kids are acting crazy, and you have to open one of those thick letters that came certified from the IRS. It is generally not a very fun thing to come home to. But it is often not the end of the world. Here are 5 things to do if you do get that dreaded correspondence.
1. Don’t panic.
If you receive a cryptic letter from the IRS that has lots of big numbers on it and says you owe money, do not panic. First, take a deep breath. Next, reread the letter. If you still do not comprehend what you are reading, contact a qualified tax professional, such as an Enrolled Agent or CPA, to review the letter and let you know what needs to get done. The IRS will often let you set up a payment plan. Often times the computer generated letter is incorrect, at least partially. It is important to get educated while gathering data to represent your case.
2. Find a qualified person to deal with the IRS
If you are seeking help in dealing with an IRS issue or IRS letter, find a CPA, a qualified tax practitioner, or an Enrolled Agent, a tax practitioner who specializes in, and is licensed to practice before the IRS. This should be your first stop. Your professional will usually have hundreds of hours dealing with the IRS and will probably have seen your letter before. If you choose to deal with the IRS on your own, be prepared to wait on the phone and know what the general reason is why you were sent the letter.
3. Gather all the facts.
After reading the letter, review your tax return and tax documents and try to identify the issue which the IRS has called into question. The IRS letter should identify which line items of the tax return are incorrect and what they believe to be the correct amount. When gathering data for a particular year, be aware that the same mistake may also have been made on additional tax returns
4. Respond to the letter in a timely manner
If the letter says to respond by a certain date, do your best to do so. By not responding, you will receive a follow up letter that may be more threatening and often may include penalties and interest assessed on the past due amount. To avoid that extra stress, make sure to reply to the IRS letter by the date posted. If you believe the IRS has incorrect information, you will need to provide supporting documentation showing that you do not owe the IRS any more money.
5. Pay the tax if you owe it
Sometimes you may legitimately owe the tax to the IRS. If after not finding any fault with the assessed tax due, pay the tax in a timely manner to avoid additional penalties and interest.
With more than 23 years of experience as a credentialed tax professional, Stu Steinberg CPA brings a broad depth of knowledge to his work. He can be reached at stu@erocktax.com or (781) 247-5569 anytime.