Each year, the IRS sends out millions of letters. It is the agencies first line of communication. A quick Google search did not turn up the exact number, but the IRS closed 4.7 million Automated Under Reporter (CP 2000) cases in fiscal 2011.
And notices and letters are not only sent when a balance is due. The IRS may send a letter when it has a question about your tax return or needs additional information related to a 1099 form. In some cases, the IRS might even be sending good news that you are due a larger refund.
7 Suggestions for handling a notice
The first in the list is to avoid panicking. Open the letter – resist the urge to let it sit in a pile, because ignoring the notice will only make matters worse.
Here are some other important steps:
- Read the letter carefully. It will likely contain a lot of boilerplate language, but it should clearly state if you owe a balance. You may want to run a quick search on the type of notice – for example, the CP 2000 we referred to early is sent out when the automated system catches a mismatch in information provided by multiple sources.
- Locate your tax return. If the letter mentioned changing or correcting information, compare it to the original.
- Determine if a response is necessary. It might take contacting a tax attorney when the amount is significant or you have concerns about the quality of return preparation.
The letter will detail the amount of time you have to pay a balance due or respond when you disagree. You can reply by writing to the address listed in the letter. Enclose information or documents that support your position and recognize it will take at least 30 days to get a response.
It is often hard to get through to the IRS by calling the number on the form and their customer service centers will not be able to give out legal advice. Depending on the issue, it often makes sense to seek assistance from a tax attorney on a response. Leveraging the experience of an attorney may save you from a denial and additional headaches. Also, hold onto the letter or notice for your records.