Receipt of an IRS notice signals a number of things associated with your tax filings, most noticeably that the IRS feels your information submitted either needs more support or that there is an error in a filing that needs to be corrected. For most folks the notification process is fairly simple; the IRS send what is called a desk audit notice signaling that if found an error and concludes the taxpayer needs to make a correction, usually owing more taxes. Sending the payment settles the issue and closes it for the IRS.
However, should a notice require a bit more or signal a pending audit, this does not mean it is the end of the world. The initial response should be to sit back and relax. Read the notice carefully so that you understand what is being communicated by the IRS. Again, as noted above, many times the issues can be squared away simply sending in an additional document.
Corrections come in the form of instructions as to what needs to be changed and any payments due if necessary. The IRS will identify the line and data that is in error as far as they are concerned and the result they arrive at when changed. You don’t need to automatically assume this is correct. You should take the time to compare the IRS’ conclusion with your own tax filings submitted and backup documentation. Many times the correction notice will provide how to respond if you disagree. Alternatively, if you do agree, then after a certain time period the IRS will send a payment request if it applies and you just pay it. Sometimes the payment request is already included in the correction notice and you just need to pay by the due date provided.
Disagreement with a correction notice needs more than just your personal opinion. You will need to provide the IRS your backup documentation and argument why you feel the original data is correct and the IRS is wrong. The IRS gets the last say on the matter and will respond by 30 days after receipt of your response. Make sure to send it certified mail and keep a copy so you can document you responded timely. Also make sure that the address you send the response to is the address provided on the correction notice.
If it’s convenient, you don’t even need to mail the response. The IRS has multiple regional offices in most major city locations, so a physical visit is possible. Additionally, these offices have both a customer service desk and a taxpayer’s advocate office in the same location. Both can give you significant information on how the IRS processes work and how to navigate them successfully when responding to a notice. Make sure to bring a copy of your documentation and the affected tax filing with you.
Additional detail on tax notices and corrections can be obtained by downloading from IRS.gov a copy of IRS Publication 594 – The IRS Collection Process. Also look at Publication 17 – Your Federal Income Tax for Individuals as well. If you don’t have Internet access you can get both publications mailed to you by calling the IRS at 800-TAX-FORM (800-829-3676).
Publication 594, The IRS Collection Process – http://www.irs.gov/pub/irs-pdf/p594.pdf
Publication 17, Your Federal Income Tax for Individuals – http://www.irs.gov/pub/irs-pdf/p17.pdf