Got an IRS Notice – Now What?

Open Manilla folder with a calculator, check book and pen on one side, and a stack of paper that says "Tax Withholding and Estimated Tax" on the other. A cup of coffee is placed above the folder on a dark background.
Photo by Kelly Sikkema on Unsplash

You’re flipping through the mail when you see it. An envelope with an IRS return address. OMG! What’s this about? Whether you set it aside for a while or rip it open immediately, you eventually see it – a Notice from the IRS with news that you may not want to hear.

Now what? Your IRS Notice will explain the reason they are contacting you and give you instructions on how to handle the issue. Sure, you might have made a mistake on your return, but you might just need to clarify some information. Let’s break this down into a little Q&A to simplify things. You’re already nervous about this, right?

Why was I notified by the IRS?

The IRS sends Notices to taxpayers who have a balance due, are due a larger or smaller refund than originally reported, their return has been changed or additional information is needed. Notices may also communicate the need to verify taxpayer identity or a delay in processing the return. Each Notice contains a lot of valuable information about the issue. Read it carefully.

How should I respond?

Typically, you only need to respond if you don’t agree with the information in the Notice, if the IRS requested additional information, or if you have a balance due. If the income or payment information the IRS has on file doesn’t match the information you reported on your tax return, check your return to see if you made a mistake. It happens. Just pay the amount due, or at least as much as you can.

What if I don’t agree?

Yes, sometimes the IRS makes a mistake or does not understand the information from your filed tax return. If that’s the case, make copies of any schedules or other documentation that clarifies your situation. Complete the Notice Response Form and include any explanation to help the IRS understand what you are sending. Don’t assume that the IRS will be able to interpret your documents without a brief explanation.

When should I respond?

IRS Notices generally require you to respond by a specific date. There are two main reasons you’ll want to meet that deadline – to minimize the accrual of additional interest and penalty charges, and to preserve your appeal rights if you don’t agree. Keep copies of all Notices and your response (with support documents) in your tax records, in case you need to refer to them later.

Getting an IRS Notice is nerve-wracking, but ignoring it will only make it worse. Read the Notice carefully and respond with an explanation by the due date if you don’t agree. Made a mistake? Pay the amount due, or as much as you can, to reduce additional interest and penalties. When you know what to do, getting an envelope with an IRS return address won’t make your heart skip a beat.

Make Next Tax Season Less Painful

Phew! Tax Filing Season 2017 is finally over! Well, how did it go for you? Painful? Long? Expensive?

 

Tax season’s end is the perfect time to look back at what went well and how to make next year go faster and easier. In short, less painful. Whether you prepare your own taxes or use a tax professional, you can take steps to reduce your pain and spend less time on your taxes.

 

Three tips will make next tax filing season much less painful:

 

Get Organized

Disorganized tax records means that getting ready to file takes hours away from enjoying your life. Not to mention the stress! Having a computerized or paper process is essential for getting organized. Scanning documents into folders or filing papers into an accordion folder puts everything you need at tax time in one place.

 

Know What to Keep

Use your 2016 tax return to identify the information you’ll need to accumulate during 2017 to prepare for next year. Will a life event in 2017 change your tax situation? Things like buying a home, starting a business, or getting married all impact your taxes. Find out what documents you’ll need for tax time next year.

 

Keep Records Up-to-Date

A big stack of papers waiting to be organized can be scary. Keep up with the paperwork and the task is easier to do. Not to mention how much easier it is to find information, because it’s right where you need it to be. Need pay stubs and account statements to apply for a loan? It’s all there, ready for you.

 

Make next tax filing season less painful, long and expensive by getting organized, knowing what to keep, and keeping up-to-date. You’ll be glad you did, next year and every year after that.