Receiving a letter from the IRS is unsettling and stressful. Often times, when people receive such a letter, they immediately think that something is wrong and that money is owed. Although this can be the case, there are many other reasons why the IRS contacts taxpayers. These reasons include the simple need for additional information, notification of the status in processing a tax return and a change in connection with an expected refund, to list a few. More often than not, the reason for the contact from the IRS can be easily resolved. The following are five tips on what to do if you happen to receive such an unwelcomed letter.

  1. STAY CALM– Letters from the IRS generally detail the reason for which they have contacted you. Additionally, letters provide instructions as to how to handle the issue. Stick to the directions and act accordingly. If the letter is unclear or confusing, be sure to contact your accountant.
  2. REVIEW YOUR RECORDS– If the communication from the IRS is in connection with a tax return that was previously filed, the taxpayer should compare the information detailed in the letter with the corresponding year’s tax return to see if it is an obvious issue that can be resolved quickly.
  3. DON’T OVERREACT– Unless the letter specifies that a response is needed or instructs you that a payment is to be made, it may not be necessary to even reply to the letter.
  4. ACT TIMELY– If a taxpayer does not agree with the letter, a response should be mailed with an explanation as to why there is a disagreement. Supporting documentation should be included with the communication. The response should be timely, deadlines are shown on the letter and your delay may create additional interest and/or penalties. You should ask your accountant for help in responding.
  5. RETAIN the LETTER– Copies of letters and/or notices from any tax authority, including the IRS, should be kept with one’s tax records for the corresponding year, and retained for five years.

If the IRS does make changes to information in connection with a previously filed tax return, the reason(s) may not seem straight forward and may appear to be complex. If this is the case, one should definitely consult with their CPA.

Finally, if you are skeptical about the letter or if the letter appears to be questionable as to whether or not it is truly from the IRS, call the IRS for verification at 1-800-829-1040.

Have no fear, now you know what do once the tax letter is here!

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