Although unpleasant, it is not uncommon for taxpayers to receive Notices from the Internal Revenue Service. The most common set of Notices are the computer-generated CP series. These Notices are sent when the Service suspects that there may be a problem with your return.
In many cases, the IRS computers will determine income amounts reported by third parties, such as your employer or bank. Then it will attempt to match these amounts to those reported on your return. When the system uncovers a mismatch, a Notice is automatically generated. At this point, an automated collections process is put into motion.
If you receive a Notice from the Service that proposes additional taxes, it is important that you understand that these Notices may contain errors. Accordingly, you should scrutinize the Notice carefully. Usually, you have 30 days from the date of the Notice before you must respond, so don’t panic. But if you miss or ignore this deadline, you will turn what might be a minor problem into a more significant one. The automated collections process can be like a fast-moving train that is difficult to stop or divert.
Begin your analysis by comparing the items of income in question on the Notice with that which is reported on your return. Make sure you are comparing the same tax years.
KARLA MORALES, CPA
If you determine that the Service is correct, you should pay the amount requested as soon as possible to avoid any additional penalties and interest.
If you determine that the Notice is not correct, it is best to respond directly to the Notice in writing. You should accurately lay out the facts and provide evidence that supports your position. You should mail that response to the address shown on the Notice via priority mail.
If you determine that the Notice is partially correct, you should amend your return for that tax year using Form 1040X. In the explanation, you should state the basis for the amendment, and pay the additional balance. Generally, it is best to mail the amended return with a copy of the Notice to the address on the Notice. Again, use priority mail. That way you can track the item and know exactly when the Service receives it. This could become critical if you are close to the deadline. The approach is to prevent the collections train from leaving the station.
And finally, if the Service contacts you in regards to a discrepancy or even a delinquency, they will never call or email you. A caller who identifies themselves as an IRS agent demanding immediate payment is certainly a scammer, and you should immediately hang up!
If you’ve received an IRS and want assistance, call this office.