When receiving a notice from the IRS, the best way to handle it is to respond and establish contact with your assigned IRS agent as soon as possible to avoid compounding issues down the line.
The IRS’s first means of contact is a written notice via regular mail.
- This initial contact will never demand immediate payment via unusual means.
- The IRS will provide direct contact information, typically in the form of a 1-800 number, a street address, and a notice type.
HOW IT WORKS:
First notice generally comes in the form of a CP notice, indicating discrepancies in the information the IRS has on file compared to what you submitted to them.
- This notice is computer-generated, and typically will contain a request for additional information to determine where the discrepancy lies, or a proposal for an assessment to resolve the issue.
- You are not required to accept the assessment as proposed – the IRS allows you to appeal their internal decisions if you disagree with them or have evidence that they are incorrect.
WhAT COMES NEXT:
If the IRS is not convinced by an argument you make, or receive no response from you, the next step is to issue a Notice of Deficiency.
- You have 90 days from the date of receipt of such notice to file a petition with the Tax Court to dispute the IRS’s position.
- If you miss the deadline for filing with the Tax Court, or if you settle with the IRS regarding a proposed settlement from a CP notice, the IRS will move on to the collections stage, and will no longer engage in arguments or negotiation over the stated amount to be collected.
WHAT YOU CAN DO:
Always respond to an IRS notice as soon as possible, and engage with the agent assigned to you regarding possible solutions.
- The IRS is frequently willing to set up payment plans for taxpayers to manage their debt over a longer period of time, or may settle for a smaller amount if they deem the stated amount infeasible to collect.
- Ignoring IRS notices will never make a potential issue go away – be proactive and solve the problem before it gets worse.