Responding to IRS Notices

Every year the IRS mails letters or notices to taxpayers for many different reasons. Typically, it’s about a specific issue with a taxpayer’s federal tax return or tax account.

Each notice or letter contains a lot of valuable information, so it’s very important that you read it carefully.

The IRS sends notices and letters for many reasons including:

  • There is a balance due.
  • The taxpayer is due a larger or smaller refund.
  • The Internal Revenue Service has a question about the tax return.
  • The IRS needs to verify your identity.
  • The IRS needs additional information.
  • The tax return was changed by the IRS
  • The processing of the return has been delayed 

If your client received a letter or notice from the IRS, it will explain the reason for the contact and provide instructions on how to handle the problem. There is no need to do anything further, if you agree with the changes, . However, f you don’t agree, you should respond as directed in the notice. You should allow at least 30 days for a reply from the IRS.

If the notice or letter requires a response by a specific date you should comply to minimize additional interest and penalty charges and to preserve your client’s appeal rights if you do not agree.

The IRS will normally provide a contact phone number on the top right-hand corner of the notice or letter. You will be required to contact the IRS if you do not agree with the information, if you are required to provide additional information, or if the taxpayer has a balance due. You may also reply in writing at the address in the notice or letter. If you write, allow at least 30 days for a response.

All taxpayers have the right to challenge the IRS’s position and be heard. This is part of the Taxpayer Bill of Rights, which clearly outlines the fundamental rights every taxpayer has when working with the IRS.

Taxpayers have the right to:

  • Raise objections.
  • Provide additional documentation in response to formal or proposed IRS actions.
  • Expect the IRS to consider their timely objections.
  • Have the IRS consider any supporting documentation promptly and fairly.
  • Receive a response if the IRS does not agree with their position.

If the IRS does not agree with the taxpayer’s position:

o The agency will issue a notice proposing a tax adjustment. This is a letter that comes in the mail.
o This notice provides the taxpayer with a right to challenge the proposed adjustment.
o The taxpayer makes this challenge by filing a petition in U.S. Tax Court. The taxpayer must generally file the petition within 90 days of the date of the notice, or 150 days if it is addressed outside the United States.

Taxpayers can submit documentation and raise objections during an audit. If the IRS does not agree with the taxpayer’s position, the agency issues a notice explaining why it is increasing the tax. Prior to paying the tax, the taxpayer has the right to petition the U.S. Tax Court and challenge the agency’s decision.
 
In some circumstances, the IRS must provide a taxpayer with an opportunity for a hearing before an independent Office of Appeals. The agency must do this before taking enforcement actions to collect a tax debt.

Collection of tax debts include levying the taxpayer’s bank account. Immediately after filing a notice of federal tax lien in the appropriate state filing location. If the taxpayer disagrees with the decision of the Appeals Office, they can petition the U.S. Tax Court.

If your client receives a CP Notice, you may check the IRS website for more information by searching the Notice or Letter number.  The Notice or Letter number can usually be found in the upper right-hand corner of each page

What to do when you review IRS Notices

The following are some do’s and don’ts if your client receives mail from the IRS:

Don’t ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do

Don’t throw it away. Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when an action is taken on the taxpayer’s account, Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit. Your client may need to refer to these when filing their tax return. In general, the IRS suggests that taxpayers keep records for three years from the date they filed the tax return.

Don’t panic. The IRS and its authorized private collection agencies send letters by mail. Most of the time, all the taxpayer needs to do is read the letter carefully and take the appropriate action.

Don’t reply unless instructed to do so. There is usually no need for a taxpayer to reply to a notice unless specifically instructed to do so. On the other hand, taxpayers who owe should reply with a payment.  The IRS offers taxpayers a variety of payment options.

Do take timely action. A notice may reference changes to a taxpayer’s account, taxes owed, a payment request or a specific issue on a tax return. Acting timely could minimize additional interest and penalty charges. Certain notices request information be provided within a specific time period.

Do review the information. If a letter is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records.

Do respond to a disputed notice. If a taxpayer doesn’t agree with the IRS, they should mail a letter explaining why they dispute the notice. They should mail it to the address on the contact stub included with the notice. The taxpayer should include information and documents for the IRS to review when considering the dispute.

Do be prepared when calling the IRS. If a taxpayer must contact the IRS by phone, they should use the number in the upper right-hand corner of the notice. You should have a copy of your client’s tax return and letter when calling the agency.

Do avoid scams. The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure if they owe money to the IRS can view their tax account information in their online account at IRS.gov.

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