Why does the IRS send letters and what to do about it
Your tax return was filed months ago, and you either got a refund, you're waiting for a refund, or you paid the tax due. Then months later you open the mailbox and there’s a letter from the IRS. No need to panic! Let’s review some simple steps on how to handle an IRS letter or notification.
IRS letters and notifications
First, find out what the letter is about. There are many different types of letters and notifications from the IRS. Primarily, the IRS wants to ensure that your tax return is correctly filed and is a true representation of your income for a particular tax year.
The IRS sends notices and letters for many reasons
- You have a balance due
- You are due a larger or smaller refund
- There's a question about information on your tax return
- IRS systems have income records that don't clearly appear on your return
- Your identity needs verification
- Additional information is needed
- There's a change to your tax return
- You're being notified of a delay in the processing your return
The IRS will send you a letter or notice explaining the reason for contacting you and give you instructions on how to respond to the letter. They may be proposing to make a change to your tax return with the sending of the letter. This means it's their interpretation of what items need to change and why.
The next step is to read the letter carefully. It has important information. If you agree to the changes, you don’t have to reply or do anything further and let the IRS carry out the purpose of the change to your tax return.
Disagreeing with the changes
If you don’t agree with the changes, you’ll need to write a reply and provide proof of the items in question in the letter. For example, if you received a CP07 Notice that tells you that your Charitable Deductions are not correct and could change your tax refund, your proof would be the actual receipts from your charitable spending.
The IRS has information about the letters or notifications on their Understanding Your IRS Notice or Letter webpage. If you need further help, contact a local CPA or Enrolled Agent in your area to understand your letter and write a reply informing the IRS the changes are incorrect. Whether or not you agree to the changes, you have 30 days from the date of the letter to reply or do nothing to accept the changes.
Possible fraudulent or scam letter
Always be alert! It is also possible the IRS letter could be a scam. Doing a quick search on the IRS website for the notice number is recommended. If the letter doesn’t look right, demands an immediate payment, or you just aren’t sure, contact the IRS to double check the letter is legitimate.
For more information on scams targeting taxpayers, see the IRS Tax Scams Consumer Alerts page.
