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IRS Notices and Why The Sky Isn't Falling

The IRS sends out millions of notices every year, that’s tens of thousands of letters every day. A typical scenario goes something like this; an IRS computer sends a form letter that has been personalized with your information to a printer. It gets folded, put in an envelope and sent out with the rest of that day’s mail.

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You go to your mailbox whistling a happy tune and enjoying the warmth of the sun on your face. You reach in and pull out a hand full of mail. You mindlessly sort through the bills and catalogs while you head inside thinking all is right with the world. Then you spot it, stuck between the shoe catalog and the cable bill, the unmistakable mark of the beast (the IRS logo) in the top left corner.

Your heart begins to beat faster and your blood pressure rises a few points as a bead of sweat forms on in the middle of your forehead. Your stomach churns a little and you start feeling guilty about everything and nothing all at the same time. You say to yourself, I’m in a good mood I’ll deal with this later and the voice in your head screams, open it now the world may be coming to an end!

All About the IRS Private Debt Collection Program

That’s your First Mistake

You panicked when you shouldn’t have. Nothing the IRS is going to say to you, especially in a first notice, is going cause the world to come to a screeching halt. Nothing in there is going to require that you sell a kidney and move to a third world country either. In fact, most IRS letters only require a simple response.

Why are “They” Picking on me?

They’re not. Most IRS letters are generated automatically and have had little or no human interaction. They can be as simple as you forgot to sign your return or a really bizarre spelling error has confused the OCR program that read and processed your return.

Whatever the information is they are looking for, the notice will give you reasonably clear instructions about how to provide the information and put the matter behind you. Some notices don’t want you to actually do anything. They are just notices. Notices that they found an error on your tax return and corrected it, like you misspelled “Mississipi” and they want you to know.

Notices of correction or requests for more information are easy to handle. Simply compare your information to the IRS notice and in the case of a correction verify that it is correct and say thank you. You can just say it in your head or out loud, you don’t have to call or write to say thanks.

If the correction causes a payment to be due and the correction is fair, then follow the instructions for making the payment and say you’re sorry, same rules as saying thank you apply. It is also completely possible that the IRS is mistaken and you disagree with their correction.

In that case you can respond with a notice of your own to the IRS explaining why you disagree. Make sure you include any information and documentation showing why you are right and they are wrong. Just be sure you only send copies of documentation as well as a copy of the IRS notice you are addressing. Include any reference numbers from the notice in your letter along with your social security number and contact information.

Sit Back and Relax

Once your response to the IRS is in the mail don’t obsess about it because it is going to take at least 30 days for them to respond one way or another. It’s worth repeating that it will take AT LEAST 30 days for a response to arrive and making yourself a nervous wreck every day for a month doesn’t help.

Also bear in mind that the length of time it takes to get an answer is not an indication that you are in deeper trouble. It is also not a sign that you are off the hook either. It just means that the office or agent who will be handling your matter is busy.

What Happens When Your Tax Return Is Flagged for Review?

They’re People Just Like You

If you get a second notice or they respond to your dispute by insisting they are correct and you do not agree, you can do one of three things. The first and least attractive is to throw up your hands, toss your head back and shout at the ceiling that you give up and send them whatever they are asking for.

Option 2 is that you can find a CPA, ask for an opinion and have them deal with it on your behalf. At that point they will likely ask you for two things, a signed power of attorney so they can talk to the IRS as you and money. If you’re not a client, chances are they are going to want an advanced payment to cover their time for writing a letter.

Option 3 is that you can just call the IRS yourself and talk to a real person who will either help you understand why you are mistaken or advise you about how to best proceed furthering the dispute. This option terrifies a lot of people and it shouldn’t. IRS employees are regular people just doing their jobs. And that job when you are on the phone with them is to help you. So give them a call at 1-800-TAX FORM (800-829-3676). Now you can say thank you out loud and maybe you’ll make someone’s day!

Photo Credit: Allplatform TV

Frank Addessi Born and raised in the center of the known universe, Brooklyn NY, and currently hiding out in the bucolic hills of northeast Pennsylvania writing about personal finance. His expertise includes personal loans, credit cards and retirement. It's not easy living the American Dream but someone has to do it!
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