Tax season is upon us, and if you are like most taxpayers, you are waiting to receive your W2s and/or your 1099s in the mail so you can compute your 2018 federal and state income taxes. But what happens if you also get that most dreaded of all letters: one from the Internal Revenue Service?
Nothing makes a person’s heart drop faster than seeing an IRS return address on an envelope. You tend to panic even before you slit the envelope open. What could the IRS want with you? What are they accusing you of? Do they “just” want money or are they looking to send you to jail?
Types of Letters
Even though you probably won’t be able to stop that heart drop, do try your best to resist the urge to panic. The IRS sends out numerous types of letters and notices in the mail, including the following:
- CP11 series – The IRS claims that you owe additional money due to one or more miscalculations on a previous tax return you filed.
- CP11A – The IRS claims that you made a mistake involving your Earned Income Credit.
- CP21 series – The IRS claims that you owe additional money because of an amended return that they did themselves after they audited you or that you sent in yourself.
Believe it or not, not all IRS letters contain bad news. They also send letters like the following:
- CP21B – The IRS made a mistake in the amount of the refund they sent you and are sending you the additional refund.
- CP31 – The refund check the IRS sent you was returned to them; consequently they need you to supply your new address so they can resend you your refund.
One thing you need to remember is that the IRS always sends their letters and notices by U.S. mail. They never send them by phone, text, email or any kind of social media. Nor do they ever ask you for personal information via any of these methods. Therefore, if you receive any type of electronic communication claiming to be from the IRS, this undoubtedly is a type of fraud known as phishing that comes from a scammer, not the IRS. You should report this to the IRS either by calling 800-829-1040 or by going on the IRS’s Report Phishing page.
Read Your Letter
Obviously you cannot know what the IRS wants unless and until you read the letter you receive. Read it very carefully so you know exactly what it says and what, if anything, you need to do. If it includes information about a changed, corrected or amended tax return, be sure to check that information against a copy of the original tax return you filed.
Take Timely Action
If you need to take some kind of action, especially if you dispute the IRS’s findings, you should do this immediately. Remember, the IRS charges interest on the amount it claims you owe and also assesses penalties for such things as the following:
- Alleged failure to file
- Alleged failure to pay
- Alleged failure to pay proper estimated tax
- Alleged failure to report 1099 income
- Bounced or otherwise dishonored check
These penalties quickly accrue since the IRS charges them on a monthly basis. They generally start at 5 percent of the alleged unpaid tax, and can go as high as 25 percent. This can result in hundreds, if not thousands, of dollars in penalties above and beyond your alleged tax amount owed and the interest thereon.
Your best strategy when you’re unsure of what to do if you receive a letter from the IRS is to contact Richard A. Dubi at DubiLaw before doing anything else. As both an attorney and a CPA, he has over 25 years of experience helping taxpayers get their IRS penalties abated and successfully disputing erroneous IRS claims. Call toll-free at 833-FOR-DUBI (833-367-3824).