Why does the IRS send letters and what to do about it.
Your tax return was filed months ago, and you 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 a letter from the IRS
IRS letters and notifications
First, find out what the letter is about. There are many different types of letters or 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 notice and letters for the following reasons:
- You have a balance due.
- You are due a larger or smaller refund.
- The IRS has a question about your tax return.
- The IRS computers have income records that do not clearly appear on your return
- The IRS needs to verify your identity.
- The IRS needs additional information.
- The IRS changed your tax return.
- The IRS needs to notify you of delays in 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 handle the issue. They have not changed anything with the sending of the letter, it is only their interpretation of what items need to change and why.
The next step is to read the letter carefully as it will have a lot of valuable 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 that 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 that the IRS letter could be a scam, so 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 make sure the letter is legitimate.
For more information on scams targeting taxpayers, see the IRS Tax Scams Consumer Alerts page.