How to Deal With an IRS Letter
Receiving a letter from the IRS can be an intimidating experience, but it doesn’t have to cause unnecessary panic. IRS letters, often called “notices,” are a standard part of tax administration and can cover a variety of topics. By understanding the process and taking the right steps, you can address the situation calmly and effectively. Here’s a comprehensive guide on what to do if you receive a letter from the IRS.
Step 1: Stay Calm and Read the Notice Carefully
The first and most important step is to stay calm. An IRS letter does not automatically mean you’re in trouble or owe additional money. Many notices are informational or request additional documentation.
Key points to consider:
- Who it’s addressed to: Confirm that the notice is intended for you or a jointly filed return.
- Reason for the letter: The IRS clearly states the purpose of the notice at the top or within the first few paragraphs. Examples include:
- Clarification of information on your tax return.
- Notification of a balance due or a refund adjustment.
- Verification of identity to prevent fraud.
- Requests for additional documentation.
- Action required: The notice will outline what you need to do, whether it’s paying a balance, providing information, or disputing a claim.
- Deadline: Take note of any stated deadlines to ensure timely action.
Step 2: Verify the Notice’s Authenticity
Fraudulent IRS letters and scams are common. Before proceeding, confirm that the notice is genuine.
How to verify authenticity:
- Check the IRS letter number (usually located in the top-right corner) and compare it with the IRS’s list of valid notice types.
- Inspect the letter for signs of professionalism, including clear contact information and no grammatical errors.
- Visit the IRS website (www.irs.gov) or call the IRS directly at their official phone number (provided on their website) to confirm the notice.
Red flags of a scam:
- Threatening language or immediate legal action.
- Demands for payment via gift cards, cryptocurrency, or wire transfers.
- Contact instructions that direct you to a number not listed on the IRS website.
Step 3: Gather Relevant Documents
Before responding, collect all related documents and records to better understand the situation.
What to look for:
- Your tax return for the year in question.
- Any correspondence, receipts, or documentation related to the notice.
- Records of previous payments if the letter mentions a balance due.
Having this information on hand will make it easier to address the issue and respond accurately.
Step 4: Respond Promptly (If Required)
Most IRS letters will specify whether a response is required. If the letter requests action, respond within the provided deadline to avoid escalation.
Common response actions include:
- Payment of a balance due: Use the payment methods listed in the notice, such as paying online at the IRS website, to avoid delays.
- Providing additional information: Send copies of the requested documents, not originals, and include the form or notice number in your response.
- Disputing the notice: If you believe the IRS has made an error, write a detailed explanation and include any supporting documentation. Always keep a copy of your correspondence.
Pro Tip: Send your response via certified mail with a return receipt for proof of delivery.
Step 5: Seek Professional Assistance If Needed
Not all IRS letters require a professional, but complex situations can benefit from expert advice.
When to contact a professional:
- The notice involves a large balance due or complicated tax issues.
- You’re unsure how to respond or interpret the notice.
- The IRS has initiated an audit or collections process.
Who to contact:
- A Certified Public Accountant (CPA) with tax expertise.
- An Enrolled Agent (EA), who is authorized to represent taxpayers before the IRS.
- A tax attorney for legal matters involving disputes or criminal allegations.
Step 6: Keep Detailed Records
Maintaining a complete record of all IRS correspondence and your responses is essential for future reference.
What to document:
- Copies of all IRS letters and notices.
- Notes from phone calls, including dates, times, and the names of IRS representatives.
- Copies of your responses and proof of mailing.
Common Types of IRS Notices and How to Handle Them
Understanding common IRS letters can help you take the right approach. Here are a few examples:
- CP2000 Notice: Indicates discrepancies between the income reported on your tax return and what third parties reported to the IRS.
- Action: Review the discrepancies and respond with corrections or agreement.
- CP14 Notice: Informs you of a balance due.
- Action: Pay the balance or dispute it if there’s an error.
- Letter 5071C: Requests identity verification.
- Action: Follow the instructions to verify your identity, either online or by phone.
- Notice of Intent to Levy: Warns of potential asset seizure for unpaid taxes.
- Action: Contact the IRS immediately to arrange payment or appeal the decision.
Final Thoughts
Receiving an IRS letter can be stressful, but it’s important to remember that most notices are routine and resolvable. By staying calm, understanding the letter’s purpose, and taking prompt, informed action, you can navigate the situation with confidence. When in doubt, don’t hesitate to seek professional help to ensure the best outcome.
For more guidance, visit the IRS website or consult with a tax professional to address any concerns.