Many individuals breathe a sigh of relief after submitting their tax return to the Internal Revenue Service (IRS) on April 15th, or the next business day if the 15th falls on a weekend. Taxpayers are often eager to move on and forget about their financial obligations to the government until tax season comes again the following year.
Unfortunately, people who filed their tax returns as required by law and may have expected a refund could end up receiving a letter from the IRS instead. Frequently, they choose to ignore the letter, hoping that time may resolve the issue or that the matter is so minor that no response is necessary.
Ignoring IRS communication can be a costly mistake. What steps should taxpayers take after receiving an IRS letter in the mail?
Review the notice carefully
The IRS may send letters advising people of an underpayment of taxes. Notices could address allegedly unreported assets or income. They could advise of an upcoming audit. In some cases, they may include an amount due to the IRS, as well as information about penalties and interest. Taxpayers should read the letter carefully to determine the exact underlying cause of the tax controversy and respond appropriately. The letter may include critical deadlines for addressing the issue.
Contact a tax attorney
Understanding the basis of the IRS letter does not resolve the issue. Taxpayers may need to prepare for an audit, communicate with the IRS or gather evidence to prove that the claims made in the letter are actually inaccurate. A tax attorney can manage much of that process on behalf of a taxpayer. They can make sense of the IRS’s claims, advise the taxpayer of what evidence might be necessary and help them avoid escalating consequences.
Respond appropriately
Taxpayers may need to submit documentation, negotiate an offer in compromise or prepare for an audit. They need to avoid actions that could worsen their situation, such as transferring assets to others to avoid collection activities. An attorney can help ensure that people address the issues in an IRS letter before any deadlines.
Delays when responding to IRS notices may result in additional penalties or interest accruing. Timely action is necessary, but the exact steps a person should take depend on the type of notice they’ve received and whether the IRS accurately assessed the situation or not. Scheduling an initial consultation with the tax attorney as soon as possible after receiving an IRS tax letter can help people avoid worsening financial consequences and other potential penalties.
