BY: MAUREEN L. O'LEARY
PRESIDENT, O'LEARY-GUTH LAW OFFICE, S.C.
Just the other day I personally received a letter from the IRS stating that I allegedly owed a not insignificant sum of money. I knew the letter must be mistaken, but it was still initially unnerving.
It is common to receive a letter from the IRS (and state taxing authorities) shortly after you file your tax returns. The IRS computer systems automatically generate many types of letters, and often are sent in error. And while the IRS announced it has temporarily suspended the automatic mailing of more than a dozen types of letters, many erroneous notifications are still going out.
For example, it is common for the IRS to automatically send a letter saying it did not receive your payment, when in reality they have received your check but not processed it yet. Mistaken notifications can also result when the IRS’ scanners misinterpret (or altogether miss) numbers on tax returns (and sometimes miss entire pages of a return).
When I was notified by the IRS, I compared the letter to the tax return I filed and quickly noticed the sum I supposedly owed was exactly the sum I had rolled forward as a carryforward payment from my prior year’s tax return. Even though I had properly reported the carryforward on my 2020 return and I properly picked up the carryforward on my 2021 return, the IRS still somehow missed the whole thing and calculated my tax due without the carryforward. Fortunately, a phone call and follow-up letter to the IRS resolved the matter.
If you get a letter from the IRS, consider proceeding as follows:
1. Don’t Pay Blindly. Do not pay any amounts stated as due without first checking with your tax preparer. If the amount was incorrectly calculated or completely erroneous, it is often easier for your tax preparer (and easier on your pocketbook) to resolve the matter before you make any extra payments.
Also beware of letters that appear to be from the IRS but are actually a scammer impersonating the IRS. Tax scams are rampant.
2. Promptly Forward All Pages to your Tax Preparer. When notifying your tax preparer, promptly send them a copy of all pages (including the front and back of each page) of the letter. Don’t just snap a picture of the first page only. The IRS typically sends their letters double sided, and it is important for the tax preparer to have all pages to properly review the matter.
Notify your tax preparer as quickly as possible, since there are typically deadlines for responding.
3. Document the Resolution. If the matter is resolved with a phone call to the IRS, you or your tax preparer should document the resolution for your file. It is often a good idea to also send a letter to the IRS to document the resolution for their files. (Pro tip: When calling the IRS, call as early in the morning as possible. By mid-morning the IRS phone lines are often backed up for the rest of the day.)
If the resolution is something that will affect your future tax returns (like an adjustment to a carryforward amount), put a copy of the documentation with your tax file for next year too so you don’t forget about the adjustment when it comes time to prepare next year’s returns.
Following these steps can resolve many tax controversies quickly. Please let us know if you have any questions about correspondence you receive from the IRS or state taxing authorities.