We’re Gonna Need a Bigger Boat… or Are We?
By Ricki L. Hall, CPA
It’s been a few months; you got your tax return filed and you’re feeling good. It’s time to relax and find some place warm to take a beach vacation. But what’s this? You pull out an envelope from your mailbox with Internal Revenue Service (“IRS”) written in the upper left-hand corner. The theme song to “Jaws” starts to play in the back of your mind and your heartbeat speeds up a little; Da Dum. You open the envelope and see a notice addressed to you referencing the return that was filed. You have that feeling that something horrible lurks beneath the water, but you can’t see it clearly; Da Dum. You read the contents and see that the IRS is assessing an amount due; Da da Da da Da Dum! Your body goes into fight or flight mode!
Getting a notice from the IRS is not as bad as all that, but it can be stressful. The IRS typically sends notices for such things as a balance due, a change in your refund, or missing/additional information needed to process your tax return. Many of these issues can be cleared up with a quick phone call. If you had a CPA or other tax professional prepare the tax return, you should send a copy of any and all notices when received, even if there is no further action required.
Read through the notice carefully. Your man-eating shark may turn out to be a nurse shark that only bites when you step on it. If you agree with account changes referenced in the notice, majority of the time there is no need to reply. Taxpayers who agree to an amount due should only reply with the payment. The nurse shark minds its own business and swims away.
If you do not agree with the notice, it is important to respond as quickly as possible. This will minimize any additional interest and penalty charges and preserve your appeal rights, if needed. You can contact the IRS with the phone number typically provided in the notice. For anyone else to contact the IRS on your behalf, a Power of Attorney form will need to be prepared. If you do not feel comfortable calling the IRS or responding in writing, your tax professional would be happy to provide this service, for a fee of course. You swim on without even noticing the finned creature swimming beneath you.
Occasionally, events will happen that tax professionals may already know to expect a notice. For example, due to unforeseen technical problems on Tuesday, September 15, 2020, many e-filed business returns were not filed due to an e-filing software outage. This left accounting firms all over the U.S. scrambling to make sure the e-filing software corrected this debacle. The IRS announced they would treat a return as timely filed if it was successfully e-filed by Thursday, September 17, 2020. Normally, a notice is automatically generated with a return filed after the due date. But, like the whale shark, this type of notice looks more frightening than it is. If you receive one of these notices, please inform your tax professional immediately and they can help resolve this issue.
You are more likely to have a run in with a sneaky barracuda than a great white shark when dealing with IRS notices. There have been several scams involving IRS notices, but most of these are easy to identify and avoid. A legitimate IRS notice will arrive in a government envelope and will include the IRS seal on the notice. The notice will include a notice number in the top right-hand corner above the tax year in question. Payment options will never be to any organization other than the United States Treasury. The IRS does not accept iTunes or gift cards under any circumstance. If you receive a notice that you are unsure is real or not, contact your tax professional. He or she can keep the barracuda away.
Don’t get caught up in Shark Week. The huge, powerful jaws coming up out of the water will not be from an IRS notice, but may be from a dreaded audit. But that’s a horror story for another time.