Notices from the IRS and State Taxing Authorities

Have you experienced the dread of opening correspondence from the IRS or from a state taxing authority even though you were confident that your return was prepared correctly?  Letters of this sort that indicate that you owe additional tax, and sometimes even penalties and interest, can be very unsettling.

Although to you, receiving a letter like this can be intimidating, the reality is that this type of correspondence is very routine in the course of these taxing authorities administering the collection of taxes.  Many of the letters are simply requesting clarification of an item that you reported, or additional information that is readily available to you.  Most of the notices our clients receive can be resolved by providing the requested information within the time allowed (usually thirty days).  Often, the notices received are clearly in error, and require basic documentation to resolve.

Here are a few suggestions if you receive a notice:

1. Seek to resolve the issue as soon as possible (note the deadline to respond).
2. Don’t assume that the notice is correct and pay the amount requested, without investigating further.  Many notices are simply incorrect.
3. If you paid someone to prepare the return in question, make sure the preparer receives a copy of the notice as soon as possible. (You will also need to sign a Form 2848 Power of Attorney to authorize the preparer to talk directly with the IRS.)
4. Secure any documentation requested.  Cancelled checks, bank statements and acknowledgements form charities regarding charitable contributions are among the most common documents needed.
5. Send a letter (or have your preparer send a letter) addressing the issues raised in the notice.  The letter should be courteous, but business-like and should be directed to the issues at hand without providing information to any unrelated issue. (Respond to only the information requested.)
6. Attach documentation that supports your position.
7. If the amount of tax is significant, you might consider mailing your letter certified mail or use some sort of certificate of mailing.

We correspond with the IRS and state taxing authorities on behalf of our clients, and find that by following these steps, most issues can be resolved without the need for additional stress or frustration. 

David Payne, Manager, Tax Department