After most taxpayers file their annual tax returns, they usually don’t think about their taxes again until the next filing season. But what happens if you get a letter in the mail from the IRS, the State of New Jersey, or another state taxing authority during the year? The first step: don’t panic!
There are a variety of reasons that you may have received a tax notice, and in most cases, the resolution is quite simple. The notice will contain all pertinent information about why you are being contacted, along with the tax year in reference. If the notice proposes changes to your tax return, it will include instructions on how to proceed if you either agree or disagree with the proposed changes.
There are many reasons that the IRS or a state taxing authority might send you a notice. Some of the most common reasons include changes in a balance due, unpaid balances due, substantial increases to your refund, questions about your tax return, the need to authenticate your identity, the need for additional documentation or information to process a tax return, modifications to your return, or a notice of a delay in return processing.
When you receive a notice, make sure to read it carefully. If you agree with the notice, you can follow the instructions in the letter to get the matter resolved. In most cases, however, we would advise you to consult with your tax professional before taking any action. If do not agree with the notice you received, or don’t understand why you received a notice, a tax professional can help you get to the root of the issue. They will be able to assist you with resolving the matter indicated on the notice, and inform you of any further action that you need to take.
Should you fail to take any action in a timely manner, the taxing authority will assume that you accept the proposed changes to your tax return. In other words, even if you can argue that the IRS has made an error in their calculations, you may still be liable for any proposed tax due if you do not appeal the notice in an appropriate window of time. The notice you received will include a deadline by which you must reply.
As stated above, if you do receive a notice in the mail, there is no need to panic. The IRS has provided a list of steps to follow upon receipt of a notice or letter:
- Read the letter carefully.
- Review the information.
- Take action.
- Respond only if instructed to do so.
- Let the IRS know of a disputed notice.
- Keep the letter or notice for your records.
- Watch for scams
The last step above, watch for scams, may be one of the most important. The IRS and state taxing authorities collect sensitive information from taxpayers, such as social security numbers and bank account information. Even something that seems as simple as sending in a copy of your W-2 for verification may seem innocuous, but remember that your W-2 may contain sensitive information such as your full name, home address, and full social security number. When you receive a notice, if you are unsure whether it is legitimate or if it is a scam, be sure to check with a tax professional before sending any information. Keep in mind that the IRS will always contact you by postal mail. If you receive a phone call, email, or text message, or someone shows up at your door stating that they are from the IRS or a state taxing authority, it is a scam. Do not send these people any money or sensitive information.
While we encourage taxpayers to be vigilant in today’s rise of identity theft and fraud, the IRS and other taxing authorities are also doing their part to keep taxpayers safe. In order to ensure that fraudulent returns are not being filed using a taxpayer’s personal information, the IRS and state taxing authorities have greatly expanded the number of tax returns for which they require additional identity verification. If you receive a notice asking you to verify your identity, your tax return cannot be processed until the identity verification process has been completed. You can verify the information online, over the phone, or in-person at the tax agency office by scheduling an appointment.
If you receive a notice and want more clarity on what the IRS or state taxing authority is asking for or proposing, you aren’t sure whether the letter you received in the mail is a legitimate tax letter or a scam, or you do not agree with changes being made to your return, do not hesitate to reach out to Eiger, Lang & Company, CPA for assistance. We are here to make your life less taxing!