The Proper Way To React To An IRS Notification

Posted by: Brookside Admin

Few scenarios stress tax payers like receiving an audit notification from the IRS. While an audit can seem daunting, receiving this notification is no reason to panic. The IRS has sent out about 1.5-million of these each of the past two years. That may sound like a lot but it works out to only one out of every 104 returns filed. Some of these notifications are merely a request for more information. With all that in mind, it's still important to take the proper steps to ensure you communicate correctly with the IRS. 

  • Read

Not every message from the IRS is the same. While you may fear the worst when a letter shows up in your mailbox, it's important to try to be calm and read through the correspondence. You'll want to first verify that the notification is actually for you and that the error or missing information that it references is actually a problem. There are times when the IRS makes mistakes too. If it's an issue that needs to be dealt with, you'll want to move on to the next step as soon as possible. 

  • Respond

Whether the message you've received is incorrect, partially correct or you're fully at fault, you must respond quickly. If you agree with the issues contained in the notification, there are clear steps lined out for you to follow. It gets slightly more complicated if you disagree, even partially. In these cases, you'll need to submit an amended return that explains the nature of your disagreement. You'll return your response to the address included in the original notification. With it should be a copy of the IRS's letter and any documentation requested or used to argue your position. 

  • Gather documents

Part of your response will involved gathering documents so it's helpful if you're organized or have worked with a tax professional who will have your tax returns on file. Many of these notifications from the IRS are a request to verify claims made in your return. For example, proof of marital status or a dependent's relationship. This will require additional documentation to be returned along with a signed copy of the notification. You'll likely also need your original tax return so you can pinpoint where the error or omission is located. This allows you to check the IRS's math. If you believe the information was already included or all the information is correct, send back the return to help your case. 

  • Contact a pro

In most cases, it's wise to enlist a tax professional if you're forced to deal with the IRS directly. They'll have experience in these situations and be able to track down the necessary documents or help you check to see if the IRS's claims are accurate. If you paid for a professional to prepare your tax return initially, go back to them for help. At the very least, they'll be familiar enough with your return to help you find where the error or omission exists. Typically, you have 90-days to respond to an IRS notification of this nature. Use part of that time to verify the claims before you submit any additional payment. 

  • Make a payment

There are inevitable cases where the IRS has found a legitimate error in your return and that results in additional money being owed. If, after looking into it, you find that there is in fact a mistake, it's best to submit your payment as soon as possible. The IRS will work with you if the amount owed is beyond what you can afford in one lump sum, but if you wait beyond your grace period, daily interest will be added. 

Dealing with an IRS notification becomes much less scary when you have a professional by your side. That's why it pays to bring your taxes to the CPAs at Brown Kinion and Company. If you need audit representation or just want a professionally prepared return to maximize your refund, give us a call.