Finance Tax Time

It’s a moment every person dreads. You pick up the mail and there is an envelope from the IRS. It’s not a refund check. What do you do?

Don’t Panic

Each year, the IRS sends out millions of “correspondence audits” to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. These audits normally cover a very specific issue, often notifying you of additional small amounts of income for which you owe tax. Each letter and notice provides specific instructions explaining what you should do if action is necessary to satisfy the inquiry.

Most correspondence can be handled without calling or visiting the IRS. You simply follow the instructions in the letter and the matter is put to rest. Alternatively, you can contact the IRS to contest the matter. Simply call the telephone number indicated on the letter or write an explanation as to why you disagree. Make sure to include copies of any supporting documentation you want considered by the IRS. Typically, it will take the IRS between one and two months to respond. During the first quarter of the year, it can take two to three months.

Sometimes, the IRS sends a second letter or notice requesting additional information or providing additional information to you. Be sure to keep copies of any correspondence with your records. The IRS has been known to lose track of actions involving a taxpayer’s account.

Worse Case Scenario

Everybody has a few really bad days in his or her life. You know, the car breaks down, you spill coffee on your shirt while driving to workyou get notice of a full blown audit from the IRS. The first step you take should not be drinking to excess or driving for the border. You have rights when the IRS comes calling and one of them is particularly important.

Representation

You have the right to be represented by an accountant or attorney at your audit. Under no conditions should you even consider going to an audit by yourself. Doing so would be like throwing red meat to a lion. Instead, spend the money to get representation and let them handle the audit. In most cases, you won’t even have to go to the audit.

Nightmarish tax audits are generally a thing of the past. A letter from the IRS should not cause you to faint. Usually, the news isn’t that bad. If it is, hire representation and let them handle it.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

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Undoubtedly, you are aware of Dear John letters. Often a young lady sent them to men in the military, often containing bad news. Well, the IRS sends them to taxpayers as well.

Dear John Letters From The IRS

The Internal Revenue Service sends out millions of Dear John letters to taxpayers every year. Instead of informing you of a break up, these letters let you know the IRS would like to get a bit closer. Before you bang your head on the wall, you should understand these letters are typically not the sign of impending doom.

Dear John letters from the IRS are technically known as correspondence audits. Instead of showing up on your doorstep, the IRS simply sends a letter regarding some aspect of your taxes. The letter may inform you the IRS believes you owe extra money because of some issue. Surprising, the IRS may also send you a notice that it believes you overpaid some aspect of business taxes. Unfortunately, it does not do this for personal returns. The letter may also contain a request for an explanation of some aspect of your return or documentation supporting the same. Regardless, you need to understand the IRS sends so many of these out that there really is no reason to panic.

Importantly, the IRS almost always asks you to take very simple steps in the letter. You are almost always asked to agree or disagree with whatever they are requesting. If you agree, you rarely have to actually do anything other than perhaps cut a check. If you disagree, you need to write a letter explaining why and then wait a few months for the IRS to get back to you. If the IRS does not agree with your explanation, a larger audit proceeding may be undertaken.

Dear John letters from the IRS almost always cover simple matters. Make sure to keep copies of all correspondence, so you have a record of how things went down. The IRS often loses such things, so it can keep you out of trouble down the road if the IRS sends a second letter on the same issue.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes. Visit us to read more articles about tax help and our new tax lawyers page.

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