Quotes
from actual IRS correspondence received by clients:
"Our records show we
received a 1040X...for the tax year listed above. We're sorry but we cannot
find it."
"Our records show you owe
a balance due of $0.00. If we do not receive it within 30 days, appropriate
collection steps will be taken."
"Payment is due on your
account. Please submit payments on or before June 31 to avoid late payment
penalties and interest."
It's pretty tough to pay a balance due
of $0.00 or submit a payment on June 31 when June has only 30 days. The message
should be clear. If you receive a notice from the IRS, don't automatically
assume it is correct and then submit a payment to make it go away. The same is
true for errors in any state tax agency notices. They are often in error. So
what should you do?
Stay calm. Try not to overreact
to the correspondence. This is easier said than done, but remember, the IRS
sends out millions of notices each year. The vast majority of these notices attempt
to correct simple oversights or common filing errors.
Open the envelope. You'd be surprised
how often clients are so stressed by receiving a letter from the IRS that they
cannot bear to open the envelope. If you fall into this category, try to
remember that the first step in making the problem go away is to open the
correspondence.
Review the letter. Make sure you
understand exactly what the IRS thinks needs to be changed and determine
whether or not you agree with their findings. Unfortunately, the IRS rarely
sends correspondence to correct an oversight in your favor, but it sometimes
happens.
Respond in a timely manner. The
correspondence received should be very clear about what action the IRS believes
you should take and within what timeframe. Ignore this information at your own
risk. Delays in responses could generate penalties and additional interest
payments.
Get help. You are not
alone. Getting assistance from someone who deals with this all the time makes
going through the process much smoother.
Correct the IRS error. Once the
problem is understood, a clearly written response with copies of documentation
will cure most IRS correspondence errors. Often the error is due to the
inability of the IRS computers to conduct a simple reporting match. Pointing
the information out on your tax return might be all it takes to solve the
problem.
Certified mail is your friend. Send any
response to the IRS via certified mail. This will provide proof of your timely
correspondence. Lost mail can lead to delays, penalties, and additional
interest on your tax bill.
Don't assume it will go away. Until you receive
definitive confirmation that the problem has been resolved, assume the IRS
still thinks you owe the money. If you don't receive correspondence confirming
the correction, send a written follow-up.