As soon as you see a letter in the mail from the IRS you probably already start anticipating bad news. You may even put off opening it for a while because you’re scared of what they have to say. Relax, getting the issue resolved may be easier than you think. Plus, ignoring the notice won’t make it go away. Here’s what to do if you receive an IRS notice.
Read the notice
It seems pretty obvious, but the first step in dealing with an IRS notice is to read it. The notice will explain why they’re contacting you and provide instructions on what to do next. Commonly, you’ll hear from the IRS if:
- You have a balance due
- You’re due a larger or smaller refund
- They need to verify your identity
- The IRS has questions about your return
- They need more information
- They changed something on your return
If they adjusted your return, grab a copy of the original and compare the results. If you agree with their findings, you usually don’t have to contact them. Taxpayers who owe money can just make a payment to clear their debt.
Respond by the deadline
Taxpayers who disagree with the IRS notice or owe money must respond by the deadline. The faster, the better because you’ll be able to minimize penalties and interest. You can either call the IRS using the phone number provided in the upper right-hand corner of the notice or write a letter. Make sure you have a copy of the notice and your tax return handy if you call. If you prefer to plead your case in writing, be sure to include any proof you have that supports your claims. Keep in mind, it usually takes at least 30 days to get a response from the IRS. So, try to be patient.
Pay your balance
If you have a balance due, pay it off as soon as you can. Even if you can’t afford the full amount, at least put something towards it or try to get on a payment plan. Typically, the penalty for failing to pay your tax bill starts at 0.5% of your unpaid taxes each month or portion of the month it’s late. However, it can climb up to 25%. Your balance will also accumulate interest daily. The interest rate is the federal short-term rate plus 3%.
Keep a copy for your records
Once you’re done with the notice, don’t just shred it or throw it away. The IRS suggests keeping a copy with the rest of your tax records just in case you need it again later.
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