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Letters from IRS could lead to full-scale tax investigation

While sorting through their mail this year, a number of Southern California residents have probably had their hearts skip a beat as they discovered a letter from the Internal Revenue Service. Perhaps it was a request for information, or perhaps it was the dreaded notice of deficiency, which is the herald of tax litigation. Whatever the contents, a communication from the IRS rarely fails to induce anxiety.

In one of its summertime tax tips, the agency offers reassurance to those who happen to be on the receiving end of one of the millions of letters it mails out every year. The IRS says letter recipients should not panic because many of the letters do not require complex methods to resolve them. While the agency may be right about not panicking, it may be overstating the simplicity with which tax controversies can be resolved.

It is true, as the tax tip notes, that an IRS communication will contain instructions about what taxpayers must do in response to the letter. But some of these instructions, the actions one must take and the legal and financial consequences of those actions may not be clear to the average taxpayer. It is important to seek help when the IRS requests information or otherwise communicates with a taxpayer.

Assistance is especially vital when a person disagrees with the IRS. The legal procedures for contesting an assessment of tax are highly complex, and taxpayers unfamiliar with them could easily overlook something that could negatively affect their case. In addition, dealing with the IRS bureaucracy by oneself can be extremely frustrating and time-consuming.

Source: Salt Lake Tribune, "A notice from the IRS? Here's how not to panic," Aug. 22, 2012

• Even basic inquiries from the IRS can turn into complex cases. If you would like more information on my firm, please visit my California IRS investigation page.

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