What to Do When an IRS Notice Shows Up at Your Door
In the course of a typical person’s lifetime they most likely have very little correspondence with the IRS. So it a letter with the return address shown on the left often comes as quite a surprise and, accordingly, most people don’t know what to do.
There are three typical responses: (1) open it, read it, and try to understand it (a good response); (2) open it and pay it, no matter the amount, just to get the IRS to go away (a bad response); (3) throw it in a drawer and hope it goes away (a terrible response).
The most important response is to not panic. The IRS sends out millions of letters each year for a variety of reasons. Most of the time they require additional information or clarification to your return. Their tact is a little off sometimes, as their approach is usually “you did your return wrong and you owe us more money” rather than “we need a little help understanding your return.” But, just because they are indicating your return was prepared incorrectly does not make it so.
Most of the time there is, in fact, no additional amount due. The IRS just needs you to clarify something on the return or add some information you may have omitted. Sometimes, however, you may owe some additional tax. Usually this is because you received a form (like a dividend statement) that wasn’t included on your return. In that case, you probably do owe the taxes, but be careful. Check to see if they are charging penalties. Penalties are charged at the option of the IRS, and most of the time they don’t charge them. If they are don’t just pay it. Call your accountant at ShindelRock and see what your options are. Penalties can be removed (again, at the option of the IRS) and we can work out the best way to approach them to increase your chance of getting them removed.
For the last number of years the IRS has worked to improve its image from sleazy collection agency to a “friend” of the taxpayer. It has been our experience that they do try to work with the taxpayer to get their tax issues resolved.
If you ever have a tax issue that you don’t think you can afford or are afraid to address, don’t stick your head in the sand and hope it goes away. Give us a call and we can help you through it. The fear of the unknown is a big hurdle, but dealing with it head on goes a long way to helping you sleep at night.