Getting a letter from the IRS can strike fear into the heart of any taxpayer. But there’s no need to panic. These letters are extremely common: in fact, the IRS sends millions of letters to taxpayers each year, and for a wide variety of reasons.
Here’s what to do if the IRS sends you a letter.
Reasons You Could Get a Letter From the IRS
If the IRS sends you a notice, it doesn’t always mean you’re being audited. The IRS mails letters to taxpayers for many reasons — in some cases they are even sent out automatically when certain issues arise.
Here are a few of the reasons you could receive an IRS letter:
- You owe money. Whether they didn’t receive your payment, you underpaid your tax bill, your electronic payment didn’t get matched properly to your return, or there was an adjustment to your return resulting in money owed, you may get a notice from the IRS.
- You overpaid your taxes. You could also get a letter if you overpaid on your taxes. If you did overpay but owed other taxes at the federal level, the IRS will apply your overpayment to those taxes. If not, you will receive a refund, which will come separately from the letter.
- Your return will be delayed. Many taxpayers experienced a delay in their tax return this year due to the COVID-19 pandemic and related tax changes. If this happened to you, you likely received a notice from the IRS. Whenever there is a delay in processing your tax return, the IRS will send a notification by mail.
- There is a discrepancy. You may also receive a notice if there is a discrepancy on your return — for example, if the interest you reported on your 1040 was different from the amount the bank reported.
- Additional information is needed. If the IRS needs more information about any part of your tax return — such as clarification of a deduction, for example — they will send a letter.
- The IRS needs to verify your identity. You will also receive a letter if there is any uncertainty about your identity — for instance, if your return included a name misspelling or incorrect social security number.
- The IRS made adjustments to your tax return. If the IRS corrects or changes your return for any reason, they will notify you in a letter.
- Audit request. And, of course, there will be some instances where an IRS letter means an audit. But even if this happens, there is still no reason to panic — your CPA can help you sort out the issues that triggered an audit and walk you through the audit process.
What To Do When You Get an IRS Letter
Regardless of why the IRS sent you a letter, here’s how to handle it:
Don’t Panic, But Don’t Ignore It. Each notice you receive will correspond to a specific issue and will include instructions for how to address it. Most of the time, all you need to do is read the letter and follow the instructions in it.
Read the Letter Thoroughly. Review the information included in the letter. If it involves a change or discrepancy in your tax return, compare it to your return.
Contact Your CPA. Involve your accountant by sending them a copy of the letter right away, even if it seems like no action is needed or it is a very minor matter. Even a small issue could affect next year’s taxes, so your accountant should be made aware of it.
Take Timely Action. In most cases, if action on your part is necessary the IRS will give you 30 days to respond. Promptly following the instructions contained in the letter can minimize any penalty fees or additional interest charges you could incur.
Keep a Copy Of the Letter. Keep copies of all notices or letters you receive from the IRS with your tax records in case you need them in the future.
Watch for Scams. The first contact you receive from the IRS typically comes in the mail — they will not contact you by social media, text, or email. They will also never use tactics like angry demands to pay immediately, threats to have you arrested, or asking you to call with a credit or debit card number. If you are unsure if the letter you received is legitimate, contact the IRS at 1-800-829-1040 or learn more about determining if a notice is legitimate on their website.
How To Respond to a Letter From the IRS
Many letters the IRS sends out don’t require a response from you. Typically, you will only need to respond if:
- you disagree with the information they send
- to provide information that was requested, or
- to pay a balance due
It’s rare that you will need to call the IRS to handle your issue, but if you do, use the phone number listed on the top right-hand corner of your notice. Have a copy of the letter and your tax return on hand when you call.
Otherwise, you can respond in writing to the address included in the letter. Make sure to include any information or documents that support your response, as well as any tear-off portion of the notice, if there is one. If you do reply by mail, be prepared to allow at least 30 days for the IRS to respond.
And, of course, don’t forget to contact your CPA right away. They can help you prepare your response as well as any supporting documents you will need, and will ensure that any discrepancies with your tax return are taken care of appropriately.
Don’t have a CPA yet? We can help. Wood CPA offers tax preparation services for state and federal taxes for individuals, corporations, partnerships, trusts, estates, and nonprofits. Contact us today to learn more about how we can help you with your tax needs.