The information in this article is up to date for tax year 2023 (returns filed in 2024).
“Don’t panic!” You open that mailbox, and there sits a letter from the IRS. Your heart starts racing, your mind goes blank, and you’re in panic mode! You start anticipating bad news while you stare at that envelope without opening it. We get it, you’re scared of what they have to say. But we’re here to tell you to RELAX! Getting the issue resolved may be easier than you think! Plus, ignoring the notice could lead to hefty penalties in the future. Here’s what to do if you receive that IRS notice.
Read the notice to see why it was sent
It seems pretty obvious, but the first step in dealing with an IRS notice is to read it. The notice will explain why they’re contacting you and provide instructions on what to do next. See below for most common reasons you’ll hear from the IRS:
- You have a balance due
- You’re due a larger or smaller refund
- They need to verify your identity
- The IRS has questions about your return
- They need more information
- They changed something on your return
If your return was adjusted by the IRS, grab a copy of your original tax return and compare the results. If you agree with their findings, you usually don’t have to contact the IRS. Taxpayers who owe money can make a payment on the IRS website to clear their debt.
Respond right away if you disagree with the IRS notice
If you disagree with the IRS notice or owe money, you must respond by the deadline. The faster, the better because you’ll minimize penalties and interest. You can either call the IRS using the phone number provided in the notice or write a letter. When calling, make sure you have a copy of the notice and your tax return handy. If you prefer to plead your case in writing, be sure to include any proof you have that supports your claims. Keep in mind, it usually takes at least 30 days to get a response from the IRS. So, try to be patient.
Submit a payment, if necessary
If you have a balance due, pay it off as soon as you can. Even if you can’t afford the full amount, at least put something towards it or try to get on a payment plan. Typically, the penalty for failing to pay your tax bill starts at 0.5% of your unpaid taxes each month or portion of the month it’s late. However, it can climb up to 25%. Your balance will also accumulate interest daily. The interest rate is the federal short-term rate plus 3%. If you can’t afford to pay your full balance right now, you can apply for a IRS payment plan and them over time.
Keep a copy for your records
Once you’re done with the IRS notice, don’t just toss it in the trash. The IRS suggests keeping a copy with the rest of your tax records just in case you need it again later. Wondering how long to keep your tax records? Find out the answer here.
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The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
