06/03/2023 in Uncategorized

Tips for Successfully Handling a Tax Notice

Tips for successfully handling a tax notice

If you have filed income tax returns for a sufficient number of years, it is highly likely that at some point, one of them will come under closer scrutiny by either the IRS or your home state tax authority. Such scrutiny can manifest as an audit notification, a request for additional information, or a preliminary assessment notice. This article aims to provide you with tips on how to handle a notification from a taxing authority effectively.

  1. Act promptly: Discovering an envelope from the IRS or your state tax authority is rarely good news, but ignoring it is the worst course of action. Tax notices typically provide a specific timeframe for response. Once that window closes, your options become limited. Therefore, it is crucial to address the matter promptly.
  2. Consult a professional: If your tax return was prepared by a certified public accountant (CPA) or another tax professional, it is advisable to have them review the notice before taking any action. Even if you believe you can handle the matter on your own, involving the preparer increases the chances of achieving a favorable outcome. They can review the notice and provide guidance on the next steps.
  3. Question the correctness of the notice: Do not automatically assume that a notice assessing additional tax, penalties, and interest is accurate. Many tax notices are generated by computers and are susceptible to errors. Taxing authorities can also misapply tax payments, resulting in an incorrect balance due for the taxpayer.
  4. Provide only requested information: If the notice requests additional information, avoid disclosing more than what is specifically asked for. Providing unnecessary information may invite further inquiries, which can be avoided, especially if your tax return was prepared correctly.
  5. Challenge penalties, if applicable: Even if the tax balance due is accurate, you may still have the opportunity to petition for the removal of penalties, particularly if you have a history of compliant tax filing. While interest assessments are typically non-negotiable, a well-written letter can often convince authorities to waive penalties.
  6. Be patient and courteous: Since the pandemic, telephone correspondence with the IRS and state revenue departments has become challenging, with long wait times becoming the norm. However, it is crucial to maintain a courteous attitude when speaking with the representative on the other end of the line. Adopting an adversarial approach rarely works in your favor.

Following these steps does not guarantee a favorable outcome, but it puts you in the best position to navigate the situation successfully.