The Dreaded Letter From the IRS

It is a part of just about all of our daily habits. We stroll out the mailbox to see what interesting bit of mail we got. As you dig through the junk mail, you see a few bills and an ominous looking letter. Egad, it is from the IRS. A dear john letter of a different sort.

Thick letters from the IRS are pretty much the norm. This is particularly true if you own a business. The thick letters are full of forms. Ah, but what about a thin letter from the agency? This is typically nothing but bad news.

A thin letter from the IRS usually contains something known as a notice statement. A notice statement is issued for one reason only. The reason is the IRS has determined there is something fishy with your taxes. Okay, now you can panic.

Importantly, this one page letter is not always the precursor to doom. In very rare circumstances, it can contain good news. I once received one. After recovering from an anxiety attack, I actually read the letter and learned I was due just under twenty bucks.

Audit. It is a word that can make a grown man or women weep like a small child. Well, most of these letters are notices of audits. Sorry. Ah, but the audit will rarely be the type of horrific experience you have heard of from someone who knew someone.

A vast majority of the time, the notice will be for what is known as a correspondence audit. This means the IRS is contesting something about your taxes, but is willing to give you the opportunity to deal with it by mail. That means no grilling by an agent.

With a correspondence audit, the nature of the dispute will be identified in the letter. The agency will often indicate it doesn’t buy one of your deductions. It will also suggest a revised amount due on your taxes. In short, the problem and solution is provided.

Once you receive the letter, the burden is on you. You are usually allowed to do nothing if you agree with the proposal of the agency. If you want to fight it, you have 30 days to send a letter saying as much and why.

If you agree with the proposed changes, the correspondence audit is resolved and you are done with it. If you disagree, you may turn a molehill into a mountain. It may be wise to hire a tax attorney to help you with the coming brawl.

The IRS issues millions of notices to taxpayers each year. A huge percentage are resolved without blowing up into a bigger audit. If yours does, make sure to get professional help. Tax attorneys offer the best prospect of getting the IRS to back off.

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