You know the feeling well… you’re just going about your business, walking out to the mailbox to pick up the daily mail. For some reason, the pile feels a bit heavier today. And as you sort through the junk and the magazines and the bills, you find that you’ve received a little love note in the form of a tax notice from the Internal Revenue Service (IRS). No wonder the mail is so heavy today… the IRS is looking for more of your well-earned money.
What Should You Do When You Get a Tax Notice?
After you’ve taken a few deep breaths and have stopped swearing at the government for wanting more money, there are some steps you should take to respond to the notice in the quickest way possible.
First, don’t do nothing. The absolute worst thing you can do is toss the notice in the trash. The IRS and other taxing authorities are relentless in their pursuit of additional money. Ignoring a notice can have very significant implications. For example, the IRS can levy your wages and your bank account and they can also place a lien on your property. So, take every notice very seriously.
Secondly, read it. What does the notice say?
- Are they looking for information?
- Are they proposing changes to your tax return?
- Has your return been pulled for an audit?
The IRS has over 200 types of notices that it sends and each one has a very particular and specific purpose. It’s important to read the notice to understand what it is they are requesting. Many notices have codes on them; the IRS’s website explains what they mean and helps you understand your IRS notice or letter.
Next, decide what to do.
If you use a tax professional to prepare your return, you should get him or her involved as soon as possible. Likely the IRS is looking for information that your tax pro will have on file. We are required to maintain records for our clients, so chances are we will be able to find your tax information faster than you will.
Your tax pro will take a look at the notice and will then discuss options with you. Depending on what the notice is for, the options may be fairly simple. The typical action is to write a response to address what the notice is about. For example, the IRS might be missing a piece of information needed to confirm something on your tax return. A letter explaining the situation would be written and then copies of the missing information would be included with the letter.
Sometimes, for something more serious in nature like a notice that indicates your return has been selected for an audit, your tax pro will request you sign a power of attorney form that gives them permission to talk to the IRS on your behalf. Your tax pro will handle scheduling a meeting with the agent and gathering requested documents.
If you prepared your return, you will have to decide if the notice is something you can respond to or if the issue is significant enough to get a tax professional involved. Dealing with the IRS can be a very intimidating experience and sometimes it’s best to seek out help from someone with experience in dealing with the taxing authorities. Also, don’t just automatically pay the balance that the notice indicates is due. The IRS and other taxing authorities make mistakes all the time and you don’t want to unnecessarily pay tax.
Sit back and wait. After you or your tax pro has responded to the notice, it may take up to 30, 60, even 90 days or more to reply to your response. Dealing with the taxing authorities will be a test of your patience. The waiting will be worth it in the end, if your tax pro has put together a solid response that clearly explains the issue to the IRS.
Having to deal with a tax notice can be a stressful situation. Take the necessary steps to get the issue taken care of as soon as possible. And with any luck, one day when you go out to the mail, you’ll receive a follow up letter that indicates a victory for you.
Contact our Ohio Tax Accountants
If you receive a tax notice, contact Rea & Associates. Our Ohio CPAs will review your notice and help you determine the appropriate response. Rea’s Ohio tax team has experience working with federal, state and local taxes and can help you deal with tax notices at any level.