Got an IRS letter?

Nobody likes the unexpected surprise of checking their mail and seeing a letter from the IRS (or any other state or local government). Though we may not like it, still happens. And when it does, this is what you should do:


The IRS and its authorized private collection agencies (yes, the IRS does hire collection agencies. Where did you think your tax money was going?) generally contact taxpayers by mail. When they do send a letter, it can be for a number of reasons, including. You may have a balance due, or your refund may have been adjusted - either smaller or larger. There may be a question about your tax return or the IRS needs some additional information. There are almost as many reasons they will contact you are there are stars in the sky.


There has never been a notice created by the IRS that is upfront and clear, so its important to read it carefully so you understand what they want. If after reading it a few times you still don't understand, contact your tax professional. We have seen every notice ever written and generally understand what they are simply by the notice code (such as the CP2000 which proposes changing your return to match IRS records)


This is your chance to set the record straight. Ignoring the notice for any reason, and trust me, I've heard them all, is not a good idea and can be very costly. Dealing with it now will save you stress and money later. Some notices require a response by a specific date. If you fail to meet that deadline, your return processing can be delayed, additional interest and penalties may be levied, and you may also loose your appeal rights if you don't agree.


It's important that you keep a copy of all notices or letters with other tax records. You may be tempted to throw these away, but don't. You may need these documents later. 


The IRS is the world's largest collection agency, and as such, it is their job to get their client (the U.S. Treasury) it's money. They can and will use every trick at their disposal to accomplish that. The IRS is also a bureaucracy with so many rules, regulations, twists, and turns that it makes the Gordian Knot look simple. A tax professional's job is to understand the twists and turns, to untie the knot of bureaucracy and to relieve the stress that comes with these notices. You have enough on your plate. Be careful, though. There are a lot of otherwise competent professionals out there that don't have the experience necessary to do this for you. Make sure whomever you choose is credentialed (an Enrolled Agent, CPA, or Attorney) professional. Just like you wouldn't want a Veterinarian performing brain surgery on you - they're both doctors, after all - you don't want someone representing you who just can't do the job.