What Triggers A Letter from the IRS?

No One Wants to Be Contacted By The IRS

The Internal Revenue Service is treated as something of a boogeyman by many Americans. People speak in hushed tones about audits and garnished wages and are intimidated by the thought of speaking to an agent.

Even when you’re sure you’ve dotted your I’s and crossed your T’s, getting a letter from the IRS can be bracing. But you shouldn’t panic if you open your mailbox and see the eagle-and-scales logo looking back at you.

If you’ve been intimidated by monetary matters in the past, 2021 is the perfect year to increase your financial literacy.

Avoiding an audit letter from the IRS could get you in deep water, and really, there’s no reason to panic if you hear from them.

Not Every Communication Indicates a Possible Audit

There are many reasons the IRS will contact you by mail. In fact, “snail mail” is the primary communication tool for the agency.

The IRS will only ever make first contact through the mail. Emails or messages through social media that claim to be from the IRS are fraudulent, and you should not respond to them. You may receive a phone call from the agency, but only after you have first been contacted by mail.

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A Letter from The IRS Doesn’t Automatically Mean Bad News

There are over 70 reasons you might receive a letter from the IRS. Some of these reasons may include:

  • You have a balance due.
  • You are due a larger or smaller refund.
  • They have a question about your tax return.
  • They need to verify your identity.
  • They need additional information.
  • They changed your return.
  • They need to notify you of delays in processing your return.

No matter what the reason, if you receive a letter from the IRS, you should open it right away. Their requests are usually time-sensitive, and a late response could cause you to miss out on something important.

What Circumstances Will Cause the IRS To Send You a Letter?

  • They didn’t receive your annual filing
    You’re probably aware of the annual deadline to file your taxes – April 15th. This is the last day you can postmark your return to avoid a penalty. If you neglect to file, you’ll receive a message about it. However, if you file by mail, you should keep your eyes open all the same.

    You’re probably aware that the USPS has had a rough year. Mail service has become unpredictable, and the COVID-19 pandemic could continue to delay operations. But even in past years, there was always the chance that your paperwork could get lost in the mail.

    To eliminate this risk, you can file your return electronically. Filing online is free through the Free File program – check here for more information.

  • An error was found on your filed return
    Assuming your return arrives without incident, it will be reviewed. The IRS has financial information for everyone who works in the United States, and your paperwork should match that data. If there are any inconsistencies, you’ll be sent a letter requesting clarification.

Sometimes that means you will owe extra money for your taxes. If so, you can mail a check or make a payment online. Be aware that the IRS occasionally experiences a bottleneck in processing mail. Last June, the agency’s backlog ballooned to over 11 million pieces of unopened mail due to the COVID-19 pandemic.

If you need to send a payment to resolve your letter, it is recommended you do so online. Otherwise, you risk your letter being opened late and missing your deadline.

But mistakes can happen on both ends; it’s possible your return is correct, and the IRS has outdated material. Compare the information provided in your letter with your W-2s; the IRS could owe you money.

  • Eligibility for a special program
    Tax laws occasionally change. When new programs are added, or deadlines are changed, the IRS may notify you.

    Not every adjustment is announced this way, but it is helpful when they are. Keep a lookout for letters like this, as they’re targeted specifically to people who are likely to need them. For example, people who previously filed with dependents were notified of changes to the Additional Child Tax Credit in 2018.

  • Request for information
    Sometimes, the IRS will need additional information from you. This could be in response to your annual return, or it could be administrative upkeep. Regardless, it’s important to follow up on these requests as soon as possible.

    The agency may need you to complete a form before they can release your refund, or they might have other questions about your forms. They might even need to verify your identity.

    You may want to speak directly with an agent, in some cases, instead of waiting on mail service. To contact the IRS, call 1-800-829-1040.

  • Inform you of a delay in processing your return
    Refunds are occasionally distributed later than expected. If there is an interruption in the handling of your return, you’ll be notified. You can reduce the risk of this happening by registering to have your payment direct deposited.
  • You created an account at IRS.gov
    This is one way the IRS mitigates fraud. When you first create an account on the IRS’s website, you’ll receive a letter that confirms your registration. That way, if someone tries to impersonate you by creating an account in your name, you’ll be aware. If you receive one of these notices and you did not create an account, immediately call the provided number.
  • You have been selected for an audit
    While tax audits can be burdensome, they are not the end of the world. They also do not always indicate that you have broken the law, committed fraud, or done anything wrong at all.

    Several returns are pulled each year randomly for review. These returns are selected based on an algorithm comparing data across similar returns. Additionally, someone you had financial dealings with – like a business partner or investor – could be undergoing an audit.

    Even if you’re positive your information is submitted correctly every year, it’s important to hang onto documents from your past tax filings. They will be helpful in quickly resolving an audit.

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What If You Think There’s Been a Mistake?

You may want to dispute the contents of your letter. If you think a mistake has been made, you should send a letter, along with any documents or other supporting information.

Look for any tear-off portions on the notice, and be sure to include them. It typically takes at least 30 days for the IRS to respond, so it may be helpful to call and speak with an agent.

You should respond swiftly to minimize any additional interest or penalty charges. Read your letter carefully, and be sure to follow the instructions provided. If it is a notification that you are owed money, you may not need to do anything at all.

Once you have completed all the instructions in your letter, don’t get rid of it. Keep a copy of any communications you receive. You will want to go over them with your accountant during the next tax season.

Be Vigilant

Unfortunately, some nefarious people try to use the threat of IRS communication to scam people out of their money. These are some warning signs to keep in mind if you are contacted:

  • Harshly-worded demands to pay your balance in full immediately.
  • Threatening to have you arrested for a delay in payment.
  • Demands for immediate payment with no process to question or appeal the notice.
  • Requiring the use of a specific payment method (prepaid debit card, gift cards, etc.). The IRS allows many payment systems and will never demand a form of payment.
  • Asking you to call a number and pay over the phone by credit or debit card.

If you’re not convinced your letter is legitimate, call the IRS at 1-800-829-1040. An agent will confirm your identity and go over your notice with you.

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Speak to an Atlanta Tax Attorney About Your IRS Notice

You may want guidance after receiving a letter from the IRS. A licensed tax attorney can review your case and ensure your issue is properly resolved.

Click here to schedule your appointment to speak to Alyssa Whatley right now.