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What To Do If You Receive A Notice From The IRS

Okay, so you received a notice from the IRS. What do you do now? We’re here to tell you it’s all going to be okay. Here are some steps you can take to reach resolution a quickly.

Step 1: Don’t Panic

First and foremost, breathe. It’s common for the IRS to send notices, but it’s understandably concerning when you were expecting a tax return but get some official and scary-looking government paperwork instead.

Each year, the IRS sends millions of letters and notices to US taxpayers all over the country. You may feel anxious when you receive one, but you’re in good company, and most of the time, whatever the notice entails, it’s relatively easy to resolve.

Step 2: Determine Reasoning

The second step is determining exactly what the notice is about. The IRS sends a letter for several reasons:

  • You have a balance due.
  • You are due to a larger or smaller refund.
  • There’s a question about your tax return.
  • They need to verify your identity.
  • They need additional information.
  • Your return was changed.
  • They need to notify you of return processing delays.

Every notice will contain important information about why you have been issued the letter.

It’s important that you read the letter thoroughly, take notes, and have all your tax documentation available so you can do a side-by-side comparison if necessary (especially if the notice is in regard to changes on your return).

Step 3: Respond

Once you’ve determined why the IRS has contacted you, it’s important to respond with the recommended next steps and that you do so promptly.

This is very important! You don’t want to procrastinate when it comes to communicating with the IRS. Why? There are usually two big reasons.

One, it’ll help minimize any unnecessary interest or penalty charges, and two, responding promptly will help preserve your appeal rights if you don’t agree with the notice statement. Additionally, sometimes the IRS will send a notice in regards to identity theft or fraud.

If someone has tried to file under the name, you will not be able to file without a special pin that the IRS provides. So it’s very, very important to respond quickly to avoid financial or even legal repercussions.

Step 4: Pay

If the letter notifies you of a balance, it’s important that you pay—even if it’s just a small portion. The financial penalties for nonpayment can be steep.

If you can’t pay in cash, the IRS website recommends other payment options, such as loans or credit cards. Additionally, the IRS will do what it can to help get your tax debt under control. You can negotiate to pay your balance in installments, which can be paid quickly and securely online.

Step 5: Keep A Copy Of Your Notice Or Letter

It’s important to keep personal copies of any and all notices or letters you receive along with your tax records. These copies are points of reference if should you disagree or need to file another way. So be diligent about keeping both paper records as well as records of anyone you speak with at the IRS.

Step 6: Negotiate

If you’re unable to pay outstanding balances or penalties, you’ll want to contact a representative from the Taxpayer Advocate Service. The Taxpayer Advocate Service is an independent division of the IRS which is devoted to supporting taxpayers with specialized repayment programs.

They’re the people to call when all else has failed. The IRS tax advocates can help negotiate installment programs, temporary non-collection statuses, as well as resolve delays with the main IRS division.

Step 7: Appeal

You may receive a notice that you simply do not agree with. If this is the case, you can appeal the notice. In fact, there is a separate appeals department whose mission is, as stated on the website, “To resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.” Which basically means they want to get appeals done as fast and as far as possible.

The Appeals department is another example of why it’s so important to respond to the IRS as quickly as possible. They have specialized departments that are equipped to handle your unique requirements, and often, working with the IRS is much less costly than setting financial disputes in court. So make sure you don’t wait and that you take advantage of their assistance programs.

About Rahul

Rahul is a team member of Litabi.

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