The Internal Revenue Service is often billed as a scary entity, and if you receive any correspondence from the IRS it can instantly induce panic attacks. There are many reasons the IRS may need to communicate with you, but regardless of the reason, there is no need to freak out. There is good reason to act, though. Ignoring a notice from the IRS could prove detrimental to your financial life.
What Do They Want from Me?
Open the letter right away because it may be a time-sensitive issue. If you fail to take action on some correspondence within a certain period of time, it could spell additional trouble for you. Don’t throw IRS letters into your bill pile. If you receive a certified letter, make sure you pick it up in a timely manner.
One thing to remember about IRS correspondence is that if the agency needs something from you, you will have to provide it. The issue will not go away without you taking action. You can end up in a mess if you fail to work with the IRS on whatever the issue is.
The IRS may be sending a notification about a mistake on your previous tax return, a notice about missing information, or a simply a statement of your account. If you have any repayment agreements in place, you might also get regular letters confirming these agreements or reviewing the status of your account.
Worst Case Scenario
There are some letters from the IRS that can seem more daunting. This is true if you are being informed of a tax audit. The IRS conducts many audits each year, and the purpose of these audits is to ensure the information you provided on your tax return is accurate and true. Some audits might be conducted from the IRS office, or by an IRS agent, in-person at your own home. The goal is to make sure enough tax was paid in a particular year.
The IRS will provide you with information concerning the proper documentation necessary for the audit. There will be some questions given about the tax return and the taxpayer might have to provide all of the backup proof concerning the information on the year being audited. Those who fail to reply to the request for an audit will often incur additional financial liabilities. It is best to contact the IRS to gain a thorough understanding of the audit. If a tax professional submitted the return on your behalf, you should also alert them to the audit notice you have received.
General Tips for Dealing with the IRS
Correspondence from the IRS is not always the easiest to understand, and it can be very overwhelming. The letters generally detail the situation and outline what steps are necessary for the taxpayer to do to resolve the issue. The IRS is available to answer your questions over the phone, but it is wise to have written proof that you dealt with the issue in a timely matter. Written correspondence to the IRS should be documented with copies of all paperwork and correspondence being sent. It is also important to pay the additional fees at the post office to confirm delivery and receipt of the letter you are submitting. Keep all of this documentation in a folder together for easy reference later.
If the notice you receive requires you response or action, the IRS will give you a deadline date. Make sure you note the date and don’t delay in taking action. If you fail to produce the necessary information on time, you might have to pay penalties or you may also risk having further legal action established against you.
Because of the perception of the IRS in some people’s minds, many people take the wrong stance when dealing with IRS agents. It is important to understand the IRS staff are doing their job and are willing and able to assist you through any situation. Remember, matters of the IRS require a professional demeanor and appropriate action. Taxpayers in receipt of an IRS notice should approach the situation in a calm and cool way. A good attitude is more likely to produce favorable results than a negative or aggressive attitude.
Debbie is a writer who specializes in parental finances, consumer spending and mortgages.