The attached letter submitted to the Department of Treasury and Internal Revenue Service (IRS) is the latest in a series of communications requesting taxpayer relief from persistent, unnecessary and often erroneous penalty notices and assessments. The AICPA and other professional groups called for targeted relief from underpayment and late payment penalties for the 2020 and 2021 tax year. Prior requests echoed broad tax administrative and penalty relief due to the pandemic.
The IRS, in its 2021 National Taxpayer Advocate Annual Report to Congress, acknowledged the excessive processing and refund delays, the backlog in responding to taxpayer correspondence, and the skyrocketing volume of telephone calls (approximately 282 million calls with only 32 million, or 11%, answered).
If you are experiencing frustration due to IRS notices received and inability to obtain resolution, you are not alone. The following list of do’s and don’ts was adapted from IRS COVID Tax Tip 2021-119 issued on August 16, 2021.
What People Should and Should Not Do if They Get Mail from the IRS
Every year the IRS mails letters or notices to taxpayers for many different reasons. Typically, it’s about a specific issue with a taxpayer’s federal tax return or tax account. A notice may detail changes to an account, ask for more information, or advise of a payment due. 2021 correspondence also included information about Economic Impact Payments and advance child tax credits.
Here are some do’s and don’ts for anyone who receives mail from the IRS
- Don’t ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do.
- Don’t throw it away. Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when an action is taken on the taxpayer’s account, Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit. They may need to refer to these when filing their 2021 tax return in 2022. In general, the IRS suggests that taxpayers keep records for three years from the date they filed the tax return.
- Don’t panic. The IRS and its authorized private collection agencies do send letters by mail. Most of the time, all the taxpayer needs to do is read the letter carefully and take the appropriate action.
- Don’t reply unless instructed to do so. There is usually no need for a taxpayer to reply to a notice unless specifically instructed to do so. On the other hand, taxpayers who owe should reply with a payment. IRS.gov has information about payment options.
- Do take timely action. A notice may reference changes to a taxpayer’s account, taxes owed, a payment request or a specific issue on a tax return. Acting timely could minimize additional interest and penalty charges.
- Do review the information. If a letter is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records.
- Do respond to a disputed notice. If a taxpayer doesn’t agree with the IRS, they should mail a letter explaining why they dispute the notice. They should mail it to the address on the contact stub included with the notice. The taxpayer should include information and documents for the IRS to review when considering the dispute.
- Do remember there is usually no need to call the IRS. If a taxpayer must contact the IRS by phone, they should use the number in the upper right-hand corner of the notice. The taxpayer should have a copy of their tax return and letter when calling the agency.
- Do avoid scams. The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure if they owe money to the IRS can view their tax account information on IRS.gov.
Click the link below for a copy of the AICPA letter submitted to the Department of Treasury and Internal Revenue Service.
When in doubt, we can help review and respond to any notices you may have questions about. If you have any questions, please contact us.
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice. This communication may not be applicable to your specific circumstances and may require consideration of non-tax and other tax factors if any action is to be contemplated. Please contact your tax professional prior to taking any action based on this information. Accuity LLP assumes no obligation to the reader of any changes in tax laws or other factors that could affect the information contained herein.