Received an IRS Notice? Get Back on Track in Three Easy Steps

Taxpayers can take an array of approaches to preparing for Tax Day. Some taxpayers may obsess over their upcoming tax filing obligation for days, weeks, or months in the lead-up to April 18, 2017. They may spend an exorbitant amount of time poring over their finances and the finer points of tax law in an attempt to comply with the law and also save money.

However, other taxpayers may take a more relaxed approach to their taxes. They may only open the W-2 or 1099s they received just days or hours prior to the tax deadline. To these taxpayers, it may be a race to the deadline to they file. For others, they may fail to file taxes because they believe that they do not have enough time or because they believe that a late filing may cause more harm than good. And, for the record, failing to file taxes is never a tenable position and the longer a taxpayer waits to correct the situation, the greater the fines and penalties he or she will face.

However, all taxpayers can and may receive a letter or other correspondence from the IRS. The accountants at the Cook CPA Group can help taxpayers address and handle these situations. Our CPAs provide brief guidance regarding how to get started on a tax issue. If you run into issues or would like to work with a tax professional in resolving the matter, call the Cook CPA Group at 916-432-2218.

Step 1:  Stay Calm and Confront the Potential Issue

While some people may view this first step as common sense, we have seen taxpayers allow fear and anxiety to override their better judgment. Some taxpayers may impulsively call up the IRS and accuse the agency of impropriety or otherwise take aggressive an inappropriate action that may raise red flags or otherwise make their case more troublesome than it otherwise would have been. In certain scenarios, IRS agents may even interpret aggressive actions by a taxpayer as a sign that fraud or something improper is occurring.

Conversely, taxpayers should also avoid the temptation to “bury their head in the sand” and ignore the issue. At least some individuals are likely to avoid an issue in the hopes that it will go away or get better on its own. Unfortunately, tax issues rarely get better with age. In fact, most taxpayers will come to face greater fines and penalties when a tax issue goes unaddressed.

Step 2:  Read and Understand what the IRS is Requesting or Communicating

When the IRS sends a letter or notice to a taxpayer, the communication could address an array of issues. Certain communications may require action by the taxpayer while other letters will not require the taxpayer to do anything. However, a taxpayer will not know what is required of him or her until he or she has read and understood the information contained in the letter.

The first step to understanding the issue the IRS is raising is to look for a short code on the correspondence. Typically, there is a short code located in the top-right corner or bottom-right corner. This code typically starts with the prefix LTR or CP which is followed by a string of numbers. By plugging this- information into the IRS letter look-up tool, a taxpayer can gain a general understanding regarding the topic of his or her letter.

For instance, notice code CP08 indicates that the information the IRS has shows that you may be entitled to the Additional Child Tax Credit and be entitled to some additional money in the form of a refund. Here, a taxpayer would have the option of pursuing these tax savings, but he or she would not necessarily be required to take action. Alternatively, a taxpayer could receive a notice with code LT11 indicating that the IRS has not received a tax payment from you and believes that you have overdue taxes. Clearly, this is a letter where the taxpayer will need to take action. If he or she does not, penalties and interest on the unpaid taxes will only continue to increase.

Step 3: Strategically Address the Tax Issue

Once you understand the tax issue, it is important to take steps to resolve it. Of course, it is wise to keep in mind that certain tax issues will not require action by the taxpayer. However, he or she may want to keep an eye on the correction or other action taken by the IRS to ensure that it does not develop into a problem.

In any case, a taxpayer who feels comfortable in his or her understanding of a tax issue may wish to correct the issue independently. They may simply feel that hiring a tax professional or appealing the issue is not justified by the amount of money involved. However, in other situations, the amount of money in controversy may be significant. Furthermore, the tax issues involved may be highly technical and complex. In scenarios like this, it is often prudent for a taxpayer to rely on a CPA or other tax professional.

Work with CPAs When You Receive an IRS Letter

If you have received a letter from the IRS about a problem with your taxes or changes the IRS has made to your taxes, you may need to take action and address these issues. Often, taxpayers who work with a tax professional can address matters more quickly and reach a favorable resolution. The IRS accountants of the Cook CPA Group may be able to help you address the tax concerns raised in your IRS letter. To schedule a free initial consultation, please call 916-432-2218 today.