The Internal Revenue Service (IRS) often contacts taxpayers to request or distribute information about a tax return. The IRS asks taxpayers not to panic if they receive a notice, but it’s only natural to get a little nervous when opening that white envelope. Often, all you need to do is read the letter and respond. Here are three common IRS notices and how to handle them.
Information Request
A common IRS notice that taxpayers receive is an Information Request. An Information Request is sent when the IRS has questions about your tax return. The IRS might send such a notice if it has a question about a claimed deduction or needs information to verify your identity.
It is important that you respond to an Information Request in a timely manner by sending the IRS the information it seeks. Failure to respond within 30 days means that the IRS may, for example, disallow the questionable deduction. The best way to respond is via mail. Be sure to keep a copy of your response for your records.
Changes to Return
If the IRS reviews your tax return and determines that a change needs to be made, it will make the change and notify you. This change could increase, decrease, or not affect your tax burden.
Carefully review the changes by comparing the notice against your submitted tax return. If you agree with the change and receive a refund, or there is no change to your tax burden, no action is necessary. If you agree to the change and owe money to the IRS, promptly send the payment. If you cannot pay the full amount, call the phone number on your notice to work out an installment plan.
If you do not agree with the changes, write a letter to outline your disagreement and include any important documents. You must do this within 60 days or you’ll lose your right to appeal. Be sure to keep a copy of your letter for your records.
Intent to Levy
If you have an installment plan in place with the IRS for taxes owed and you and default by either missing payments or not filing a tax return, you may receive an Intent to Levy. An Intent to Levy is the IRS’s way of letting you know that you are in default, and it outlines what the IRS intends to do about that default. Examples of what the IRS is able to do about an installment plan in default include issuing a federal tax lien, garnishing your wages, and seizing your bank accounts.
If you receive an Intent to Levy notice, be sure to contact the IRS immediately using the phone number provided in the notice. To get the best outcome possible from the situation, work with a tax professional who can help you understand your options. You have 30 days to resolve the issue from the date of the notice.
An Information Request changes to your return, and Intent to Levy are three common tax notices sent by the IRS. Most IRS tax notices require a simple reply and nothing more. Above all, try not to panic should you see a notice in your mailbox!