When you receive an IRS letter?WHAT TO DO

What not to do

Hide them in your desk and pretend they are not there.

I remember when I first started public accounting in 2007, a client came in with 10 or 15 unopened IRS letters. She was afraid, and did not know what to do so she hid them in a desk

Just send them the amount on the letter, even if you don’t understand.

Just because they say you owe, does not mean you owe. Make sure you read and understand before agreeing and sending money.

Why to respond sooner than later

Get rid of unneeded stress

Oftentimes, it turns out to be nothing or something with an easy fix. Deal with it today and get rid of the stress hanging over you.

The IRS is more likely to work with you if they hear from you.

Avoid and additional penalties and interest on amounts you may owe.

Common reasons for letters

Stock sales that were not recorded

IRS assumes there is no basis, unless you record the sales. Many times you may have a loss which means no additional tax.

An IRA or Retirement rollover that was coded wrong.

Basically, we just need documentation to go with a letter to show that it was indeed a rollover.

Unreported W-2 or 1099

Misinformation on their side.

Sometimes they can be wrong.

(Obviously, this is not a exhaustive list!)

What to do:

Read the letter.

If you read, understand, and agree with the letter then you can just do what they ask in the letter.

Consider getting professional consultation

Many people have no idea what the letters are saying or what they are talking about. Get a free consultation if available to have someone look at the letter

When Clients come to us

Sometimes a free consultation is all it takes.

Other times, a letter will resolve the matter.

We may have to amend a return.

It may require additional information.

Free Consultation

Many times the letter is just informative and nothing needs to be done. If that is the case we explain the letter and wish you a good day. (no charges)

Writing a Letter

Most issues can be handled with a simple letter or call on our behalf.

In this case, we will get you to sign a IRS power of attorney, Form 2848. That way we can draft a letter or call on your behalf. Many issues are easily handled with a letter and perhaps some documentation that verifies what we are saying.

(Note: Form 2848 specifies the year(s) and the forms involved. It is very specific and just for dealing with the IRS.)

Amending a Return

Occasionally, we may have to amend a prior year return or prior year forms. This is often sent with a letter.

If stock sales were not reported, we may have to amend a return showing both the sales and your cost. They may have been sold at a loss, which means you will not owe anything and may get something back.

Additional Information

Occasionally, we need additional information either from you or the IRS to help you resolve the matter.

We may request IRS transcripts for tax returns that were not filed.

We may need you to track down some information before we can deal with the IRS side of things.

Summary

Don’t ignore the letter.

It is always best to open the letter and respond. Even if you don’t have money right now.

Seek professional help.

Oftentimes, it helps to get a free consultation to have someone who is familiar with IRS letters to see exactly what they want or need.

Respond

Most letters or dealt with through a letter or phone call. We would be happy to do it on your behalf

For a Free Consultation

Call to set up an appointment today.

254-432-5724

Derland G. Bahr, CPA

www.DerlandBahrCPA.com