What Do I Do IF...?
What do I do if I get a letter from (oh no!) the
Internal Revenue Service? Or any tax agency for
that matter?
The first rule is DON'T PANIC - they make mistakes
too. It's a good idea to open the envelope and read
what's inside, even if your stomach is churning with
dread; you can't solve a problem if you can't name it. If
it doesn't immediately make sense, get out the form(s)
that the letter refers to (usually noted at the top of the
letter - upper right hand corner for IRS, and by your
name if a state agency) so you have a good reference
point. Sometimes all that is being requested is a form
(maybe even one that you sent
in and they didn't notice and
have to send in again), or a
corrected social security
number, or maybe you just
forgot to sign.
If you are an employer, the
possibilities are almost endless
for what you might be asked for. And maybe you are
one of the 90,000 people that got a letter from the IRS
this year that filed Form H for the first time, and the
IRS system didn't recognize Form H because they
were still looking for the form that was used last year.
Or maybe you sent in all of your estimated payments
on time, but the IRS or your State Tax department
didn't get one or more recorded properly (time to get
out those canceled checks, or call your bank to get
them). In any case, Don't Panic.
Not all correspondence with the IRS is easy, but many
letters are not as difficult to understand as they first
appear to be. The IRS, and most State Attorneys
General offices have done a good job of intimidating
taxpayers to the point that fear is almost instantaneous
when the return address is read. And some problems
are difficult to resolve, mostly taking time and
persistence. If you can read their return address as
another vendor that is either sending you a form to fill
out, or has a question that needs a response, and relax
a little, the problem can more readily be put into
perspective.
If you have had tax forms prepared by someone else,
by all means let that person know that you have
received correspondence and get a copy to them as
soon as possible. And if you are going out of town, or
will not be easily available for a period of time, let the
professional know right away so that you can discuss
your options. If it is an error that was made by the tax
professional, it is their job to correct it, but they may
need additional information from you. If it's the tax
agency's error, the tax professional will know what
steps to take to correct the problem if you have not
already figured it out. If you have prepared the forms
yourself, and need help, call your friends, the chamber,
your attorney or a business counselor and get a
referral for a professional who can help.
What to do when you get the letter (you will get
one eventually):
Open and read your mail; you can't solve a
problem when you don't know what it is.
Be patient - some problems can be corrected
immediately (with a phone call), and others can
take weeks or months depending on the nature of
the problem and which tax agency is involved.
Get advice before you send additional money,
unless the cause is obvious.
Be prepared to pay for services rendered, unless
the error is the tax professional's in the first place.
Expect to get copies of any correspondence
originating from the tax professional.
Ask questions about anything that you don't
understand.
Give the professional the opportunity to correct the
mistake if it's theirs; they will probably not make
that mistake again, and will appreciate your
patience. You will get better service in the future
as a result.
Be prepared to pay any additional tax due,
professionals will only cover penalties and interest
even the error is theirs; the tax would have been
yours to pay with the initial filing if it had been done
correctly.
Don't assume that it's all your fault, or the
professional's; communication problems happen
every day, and we all have to do the best we can
to sort through it. Negotiate the issue of
responsibility in a rational way if it's not clear.
BE PATIENT and trust your professional. If you
have a good relationship with her, you will get
good service. The worst problems can be solved,
given enough time.
DON'T PANIC; IRS makes money on people who
don't pay good attention to their correspondence
and pay additional penalties and interest.
The more questions that you ask up front, and the more
you pay attention to filing deadlines, the less often you
will receive letters from tax agencies about missing
forms, errors, and/or penalties. You cannot afford not
to pay attention to the rules for tax filings; it is still your
responsibility to make sure everything is filed on time,
even if you hire someone else to do it.
So follow through when you haven't heard from your tax
professional, and find out when your work will be done.
Deadline times are busy times for tax professionals, but
they are used to it, and have checklists and office
systems to make sure no one is forgotten about.
However, they don't mind reassuring our clients that
they are on the list or in the pile and probably have a
good estimate about when your work will be
completed.
Oh, and another thing, please look at the work that we
have completed for you before mailing it in; you can
save yourself from getting letters by noticing errors, if
there are any, before the forms are sent.
If you get a letter requesting your attendance at an
audit.... Don't Panic. Although there are really no
more random audits (even IRS is understaffed), the
reason that your return may have been selected may
not be a big deal. Yes, it will be an inconvenience, and
probably a waste of your time, but you absolutely have
to comply, or risk assessment without defense. You
can re-schedule from the time that is on your letter, but
be prepared to have a legitimate reason to explain your
request.
If you don't have everything with you the day of the
audit, you will have at least 10 days to submit other
receipts or supporting documentation. Take what they
ask for in the letter, as well tax
returns from previous years.
Consult with your tax
professional; review your
records, and if necessary,
review all worksheets that were
prepared for the purpose of
filling out the tax forms.
Often, there is some confusion
that triggered the audit in the first place, or you had an
unusual year (big loss?; supported your grandmother?),
and they just want to check it out. If you have just
neglected to report some income that comes through
on a Form 1099, you will get a letter first requesting
additional taxes, and you can respond by paying, or
amending your tax return if there are other items to be
considered. You can appeal audit findings, and amend
your return (if still open). Be organized and prepared.
There are lots of places to go for more information
concerning your taxes.