It starts off as a normal day, until you check your mail. You fumble through the typical ads and flyers until something catches your eye. Cue the horror music and high pitched scream – this is a letter…from the IRS.
For most people, these letters trigger thoughts of the worst, people often wonder “What did I do wrong?” or “How much do I owe now?!” But, this may not always be the case. The IRS uses letters as its primary source of communication with taxpayers. So whether it’s good, bad or ugly, you can expect a letter.
Now, that you have overcome the dread of actually receiving the letter, here is the hard part… understanding what the letter means. The IRS uses a lot of codes and tax law in their letters, making them hard to understand at times. The most important thing to do is read the letter in its entirety, as most letters begin with the issue and end with the steps needed to resolve that issue.
The next step is to review the tax return in question. The IRS will state the year of the return that the letter is regarding, it is important to have that year’s return available so that you can reference it. The letter may state a discrepancy, an error that was made, information that was omitted or updated, or even an entry that was removed all together. These changes usually cause a change in your refund or balance due, which is what will usually trigger the letter. If your records are missing the return in question, you can always contact your tax preparer for an additional copy, transcripts are also available through the IRS website or toll free assistance number.
The final step is the follow up. So many times a problem becomes worse because people choose to ignore it, or let it “work itself out”. If the letter is incorrect, taxpayers can always call the IRS and speak to a live representative. If the letter is correct, then be sure to fully resolve the issue. Keep in mind, if changes cause a balance due, you may be eligible to create a payment plan versus paying the balance in full, but this must be done proactively, otherwise the balance may be deducted from taxable wages or benefits.
All in all, a letter from the IRS does not have to be scary, it is up to you! Be sure to read the letter, see the return in question and follow up with the IRS. At the end of the day, if you still find yourself trembling with the letter in hand, you can always count on the tax preparers at St. Clair Financial Services to assist you in sorting it all out. We’re always a call or click away!
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