Don’t assume it’s correct, just because it’s the IRS

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.

About Brenda J. McGivern, CPA

Brenda McGivern started her own certified public accounting and management consulting firm in October 2001. The full service CPA firm provides tax and accounting solutions to meet the needs of today's small business and individual. Brenda McGivern has become a trusted advisor and valuable resource her clients rely on for timely, accurate assistance when they need it. Before starting the firm, she worked as an accountant for three years at a local firm and prior to that five years at a large international CPA firm in Boston. She has performed the following tax services: federal, state and local tax planning, international tax planning, estate and succession planning, mergers and acquisitions, capital retention and IRS representation. She has also coordinated assurance engagements, such as financial statement audits, reviews and compilations from the planning phase through the reporting phase. She has prepared and reviewed regulatory filings for numerous regulatory agencies including the Security and Exchange Commission. Prior to these positions she was selected from over 2,000 candidates into an eight-person intensive financial management program at an international technology company. The program consisted of graduate level classroom study and two six-month rotational assignments in financial operations. She graduated cum laude from the University of Massachusetts at Amherst and holds a Bachelors Degree in Business Administration with a concentration in accounting. McGivern also holds a license in Massachusetts as a Certified Public Accountant and is a member of the American Society of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. She resides in Stoughton, Massachusetts with her husband Brian, and their sons Sean, Ryan and Conor and their dog, Davis.
This entry was posted in audit, Filing Taxes, Financial Planning, IRS Articles, Penalty, record keeping, Tax, tax advice, tax bill, Tax Return, taxes, Uncategorized and tagged , , . Bookmark the permalink.

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