Tax Dispute Process

Steps To Take When You Receive An IRS Notice or Letter

Sometimes the letter you receive is actually an audit, what the IRS calls a desk audit since they are conducting the audit without leaving their desk. Sometimes the notice is not an audit, but has the same effect because they are demanding money from you.

Don’t ignore the letter. Typically, the IRS thinks you omitted some income from your tax return, or did not pay as much tax as you claimed, or did not pay part of your taxes on time. Even if the IRS is wrong, they can still collect what they think they are owed if you don’t address the issues raised in the notice. If you ignore the letter too long, you will go past deadlines to respond and you may have to pay what they want even if they are wrong, plus interest and penalties. 

Don’t panic. If you don’t owe it, don’t pay it.  Many of the IRS letters are wrong. You have time to get this resolved.  They won’t show up at your door with handcuffs tomorrow.

Respond timely. The letter usually requires a response by a specific date. If you understand the issue, respond with the specific information requested. If you don’t understand the issue, consider hiring a CPA or tax attorney to address the issues raised.  If the notice deals with deductions, you should be especially careful how you answer it. Sometimes the IRS is requesting additional information about a specific issue or item on a tax return. But even these information requests are usually headed towards a claimed amount due. A timely response could minimize additional interest and penalty charges if you do owe more tax. 

Compare to your tax return. Compare the notice to your tax return.  The IRS may be right and you will see where you made a mistake or left something off of your return.  If that is the case, you should probably pay the amount due and resolve the issue. If you don’t agree, and you understand the issue, respond with an explanation of why the IRS is wrong. If you don’t understand the issue, consider hiring a CPA or tax attorney to address the issues raised.  

Calling the IRS is usually not helpful. Normally, you won’t help your case by calling the IRS if you can’t help it by responding through the mail. If you are convinced it will help, there is usually a phone number in the notice.  This is usually a phone number that is widely published and you will typically be put on hold for a very long time. Be sure to have a copy of the related tax return and notice when calling.

Going to a taxpayer assistance center is usually not helpful.  First of all, the IRS requires an appointment for anything at these centers.  You cannot walk in when it suits you. They IRS saves a lot of money by making these places inaccessible and inconvenient for you.  You will probably not accomplish anything there that you cannot accomplish through the mail.

Always keep copies of any notices received with tax records.  Whether you agree or disagree, keep copies of all correspondence from the IRS and all correspondence that you send to them. Any changes may affect future or prior tax returns.  Also, especially if the problem is resolved, you will want to have proof.

Be sure you are actually being contacted by the IRS. There are a lot of scams out there, and scammers like to run IRS scams. The IRS will almost always contact you via regular mail.  They will not email you or call you for the first contact. If the IRS contacts you by phone later, they will not be aggressive in demanding payment.  They will not threaten to call law enforcement authorities on you or cancel a license or affect your immigration status. In a rare case when they show up in person after the initial contact they will show you their official credentials. The IRS will provide you with several payment options, and will not demand payment a certain way, such as prepaid debit or credit card. 

Consider Hiring a Tax Attorney or CPA. You may be able to handle the notice yourself if it is straightforward and you completely understand it.  If not, it is best to consult an experienced tax attorney or CPA that has handled these things before. Kelvin Birk with Birk Law Firm has responded to countless IRS notices and letters for 30 years.  He has also represented numerous taxpayers in field audits. Further, he has successfully appealed and won reversals of audit decisions several times.  The IRS is not always right and is often wrong.