This is a fairly common occurrence in our CPA office and I’m sure in most tax preparation offices throughout the country. We receive a call from a client and they are nervous about a letter they have received from the Internal Revenue Service (IRS) or the Arizona Department of Revenue (ADOR). It is not uncommon for a taxpayer to receive a notice from the IRS or ADOR. These notices can range from a simple notification to a request for documentation or information to a notice of a formal audit of a particular tax year return.
There is usually no need panic when receiving a notice – most can be taken care of by simply responding to the request given. We highly recommend contacting us immediately after receiving the notice and sending us a copy of the notice received. It is always better to handle the issue sooner than later as delaying response never results in a better outcome. We always research any amount shown as due to verify that the amount shown is correct. The IRS and ADOR do make mistakes occasionally, especially if they are calculating a balance due based on inaccurate or incomplete information such as not taking into account deductions that would be claimed on a tax return, etc.
The notice will typically be regarding a specific issue or issues for a specific tax year or years. It will provide instructions so following those instructions is key to resolving the issue at hand. You should only respond to the issue described in the letter and not bring up information or issues that do not relate to the issue at hand.
If the notice is regarding an alleged additional balance due for taxes, penalties or interest, there will usually be a deadline given for satisfying the balance due or for contacting the IRS or ADOR to establish a payment plan to satisfy the balance due. Again, it is important to analyze any balance shown as due before proceeding to make payment. We can assist with this analysis and determination of the most efficient response to provide. Unless the issue is straightforward such as a document request to substantiate a deduction you claimed on your tax return, resolution of the notice will often require a phone call by the taxpayer or us, on behalf of the taxpayer, to discuss the matter and negotiate a resolution. If you call the IRS or ADOR directly, be careful as to what you disclose during the call. Remember that the main goal of the IRS or ADOR is to collect a balance due and they will use whatever information you provide to accomplish this task.
You should keep copies of all correspondence received from the IRS or ADOR and provide a copy to our office as soon as you receive it. As I mentioned in a previous blog, the IRS and ADOR will not contact you by email or social media regarding a tax matter. They will always send correspondence by mail first and then may follow up that correspondence with a phone call if they receive no response from the taxpayer. You can know that any email received that purports to be from the IRS or ADOR is fraudulent. Also, be very skeptical of any phone call you receive from someone alleged to be from the IRS or ADOR asking for personal information. There has been a large increase in fraudulent phishing scams in the past few years. Another sure sign of a scam is if the caller makes threats of arrest by local authorities, etc.
If you have any questions regarding the proper response to an IRS or ADOR letter, please contact us. If you receive a notice, please remember to send us a copy of the notice for our quick analysis as soon as you receive it.