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Notice Season Has Arrived... What to Do Now?

8/20/2020 - By Caroline Y. Beasley, CPA

As predicted a few weeks ago, we are seeing an onslaught of tax notices coming through our virtual door from clients regarding a myriad of reasons: misapplied payments, late (but not really late due to COVID-19 extensions) filing penalties, etc. There are a few key things to do when you receive a tax notice so I want to take just a few minutes of your time to explain why these notices are being sent, how you can respond to them on your own, and when to get a professional involved.

“Why is this happening to me?”

This might be your current thought pattern once you see a certain letter from a certain government agency in your mailbox. If the Internal Revenue Service (IRS) has questions or comments about your account, they will send you snail mail. True, this is archaic, but, from a security standpoint, it is the best way to reach you. Here are a few of the reasons you may see a letter hit your doorstep:

  • You owe tax that you have not paid yet
  • The Service is correcting your refund balance, making it higher or lower than you requested
  • They need more information from you, or they have questions about your return
  • They are advising you on other corrections they have made to your return

Don’t forget that there is a slew of tax scams out there right now, so protecting yourself and your tax account is a priority for the Service. They will never call you, text message you, or come to your door to ask you about your account, so be skeptical about anything other than a paper letter. 

“How do I fix this on my own?”

In my last blog, I suggested that paying your taxes online through the IRS’s website or the Electronic Federal Tax Payment System (EFTPS) was the best way to expedite your payment for timeliness and accuracy. Well, maybe you just didn’t have time to register for EFTPS, or even after putting the information into the system accurately, the Service still doesn’t apply it correctly. This is when you start thinking about pulling out your hair… but wait! There’s a fix, so keep those curly locks in place and read on, my friend!

The Service has also created their own site for individual taxpayers to view their accounts, look at payment history, and even request tax transcripts from current and previous years. Using this site is the best way to try to resolve the misapplied payment. Alternatively, a phone number should be listed in the top right-hand corner of the letter. Each notice has a specific phone number for that department, so one letters’ contact information does not apply for any other issue. Call the number listed to discuss the problem with an IRS representative; just be ready to wait on hold for possibly an hour or so!

Writing your response letter may also help resolve the concern. If you receive a late filing or late payment penalty notice, the IRS could possibly (abate) the penalty, if you use the right terminology. When requesting first-time penalty abatement, there are three specific items to list in your letter response to the Service:

  • First, you need to confirm that you have consistently filed complete and accurate tax returns on time.
  • Second, you also must have paid all associated taxes on time (this includes installment agreements).
  • Third, your account must be clear from penalties for the three previous tax years from the year in which you’ve been assessed a penalty.

Referencing the Internal Revenue Manuals section is another point we use on our letters for our clients: IRM 20.1.1.3.3.2.1, First-Time Abate (FTA). This directs the IRS Agent or Representative who is reading your letter exactly to the part of their internal manual section you’d like to use to your benefit. It’s also good practice to end your letter with a ‘please remove the penalty’ and ‘thank you for your consideration’ when closing the response letter. After all, you are writing to a fellow human being so being nice is always an added benefit and proper etiquette!

“I need help!”

If you find that you just don’t have time to draft up this type of letter or maybe there is something more going on with your IRS account, then feel free to reach out to us and we will be happy to help you. Certified Public Accountants, attorneys, and other tax accountants can request that you sign a Power of Attorney authorizing them to speak to the Service, or other state and local jurisdictions, on your behalf. We can quickly resolve the matter sometimes with just a phone call! 

Coordinating with the IRS, especially in today’s environment, can be burdensome, causing you stress and anxiety, and is just a genuine pain in the rear-end; let us take some of the load off your shoulders! Contact a member of our Tax Team and we’ll be happy to help!

Visit our COVID-19 RESOURCE HUB for ongoing updates and information. Due to the ever-changing nature of this event, you should always consult a professional.

About the Author | Caroline Beasley, CPA
Caroline is a manager in the Tax & Accounting Services Department at Saltmarsh. She began her career in public accounting in 2010 and prior to joining the firm in 2016, Caroline worked with an international accounting firm performing tax functions for large corporations and tiered partnerships. Her experience in tax compliance and consulting services in the manufacturing, health, investment management, wholesale and retail trade, real estate, construction, and non-profit industries allows her the opportunity to serve a variety of clientele.


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