Many taxpayers would wish never to receive any letter from the IRS, as they perceive such correspondences as trouble. However, the IRS sends out millions of correspondences to taxpayers every year. These letters are for all sorts of reasons ranging from acknowledgements of receipt of a payment to information about an update in your account. Many of the letters may not even require any response from you. Therefore, if you ever receive a letter from the IRS, do not be alarmed but instead, read the letter and understand its requirements. Below are tips that will help you deal with these dreaded IRS letters:
Do Not Panic
When you receive the letter from the IRS, do not panic or avoid the letter as many people do. Avoiding the letter could escalate an issue that could have been easy to resolve and it could easily jeopardize your credibility with the IRS. Therefore, open the letter and find out the reason for the letter.
Understand the Purpose of the Letter
There are different types of letters that the IRS sends out to taxpayers. Each letter comes with a code and a heading that should guide you as to the type of corresponds. Some of these correspondences include:
• Collection Letters – Collection letters are sent to taxpayers who owe the IRS and require settlement of the bill. If you do not have the funds to settle the bill, you can seek alternative settlement options such as an Installment Agreement or an Offer in Compromise. On the other hand, if there is a discrepancy on the bill or if you are not clear about the amount, you can seek advice and representation from a tax professional on the issue.
• Audit Letters- Audit letters are sent to inquire about some information or documentation to support amounts included in your tax return. The IRS has secondary information sources that they compare with your tax return information and if there is a discrepancy, they will send an inquiry letter.
• Information Letters – These letters are sent for information purpose and will not require a response. They update the taxpayer of information, such as an update on change in address or name of taxpayer. The IRS will also inform you of corrections that they have made on your tax return form. If you are okay with the correction, then you need not respond, but if you do not agree with the correction, you can raise a petition.
Respond Within Timelines
For correspondences such as collection letters that require response, it is important to give the required information within the deadline. Get professional help if unsure as information you give to the tax authority may work against you. Remember, you do have a right to representation when dealing with the IRS and can get a licensed tax professional to help you sort issued with the IRS. You should also file copies of any correspondences sent out to the IRS as part of your tax documentation.