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IRS tax notices do's and don'ts

IRS notice envelope

In February 2022, the Internal Revenue Service stopped issuing several automatic tax notices. The move was prompted in large part by the massive backlog of tax filings that piled up when the agency closed offices as a precaution early in the COVID-19 pandemic.

That tax notice moratorium is ending.

Automated collection notices will soon show up in the mailboxes of individuals with tax debts prior to tax year 2022. Businesses, tax exempt organizations, trusts, and estates with tax debts prior to 2023, with exceptions for those with existing debt in multiple years, also are on the notice resumption list.

These reminders, which are going to taxpayers who earlier got initial balance due alerts, are the latest step in the agency's return to more normal operations.

But what is normal to Uncle Sam's tax collector can be downright scary to taxpayers.

You're right to take any IRS outreach seriously, and with a bit of trepidation. But a tax notice doesn't necessarily have to be a big, or unresolvable, deal.

Here are 10 tips to help you cope if an IRS envelope shows up in your mail box.

1. Don't panic. While hearing from the tax collector about your return is always a little unnerving, it doesn't necessarily mean you're in for a major audit. Sometimes the agency just wants more information from you. Other times, the IRS has found what it believes is a mistake on your return and wants your help in clearing up the issue.

2. Don't ignore it. If the IRS says you didn't pay enough tax, penalties and interest on the due amount will add to any tax liability. If you ignore the matter, the amount you owe will keep growing. Notices also often have deadlines for responding. If you miss them, you'll find yourself facing more tax troubles.

3. Read the notice thoroughly. Each notice has specific instructions, so read it carefully. It will tell you what you need to do, such as provide more information. Or it could explain changes the IRS made to your filing, and how that affects any tax due or refund you were expecting.

4. Know the notices. Even the IRS admits that some of its notices are confusing. It's working on changing that. If you have trouble deciphering exactly what the IRS wants, call the telephone number that's usually found in the document's upper right-hand corner. You also can familiarize yourself with the many types of notices that the IRS sends

5. Double check the numbers. When a notice includes changes by the IRS to your tax account, review the information and compare it with your original return. Nobody's perfect. The IRS does sometimes make mistakes, so you want to catch them as quickly as possible.

6. If you agree, you're done. In instances where you agree that the IRS notice information and subsequent tax action is correct, you usually don't need to do anything else. There's no need to reply unless the IRS document asks you to, or gives you other instructions, or you need to make a payment. That third situation happened to me the year I overlooked a 1099-DIV, but the IRS definitely didn't ignore its copy of the form. It calculated the tax (and interest and penalty) I owed, and told me where to send the money.

7. If you disagree, speak up. If, however, you don't agree with the notice, it's important for you to respond. Your reply not only will let the IRS know you got the notice (and have an issue with the agency's position), it also will preserve your appeal rights. The notice will tell you how to respond, which could be via mail, FAX, or digitally through the IRS' Documentation Upload Tool, which is available now in some tax circumstances.

Whichever method applies, explain why you think the agency is wrong. Include any information and documents you want the IRS to consider. And be sure you send your concerns by the response date cited in the notice.

8. Keep good records. Keeping good records, both of your official forms and substantiating material, is a solid piece of advice even if you never hear from the IRS. But when it comes to IRS notices, you'll also want to make sure you keep copies of any notices and all follow-up communications and documents.

9. Know when you need help. Many notices are routine and relatively easy for taxpayers to take care of on their own. Some, though, are more complicated or confusing. Or you just don't want to deal with the IRS yourself. In any of these situations, getting professional tax help is a good move. A reputable tax professional with experience dealing with the IRS can  can help you through the process in the lease painful and costly way. Plus, you'll have the peace of mind knowing you have a capable tax pro on your side.

10. Be alert for scams. Most tax scammers tend to show up online or as phone callers, while the IRS primarily communicates with taxpayers by letters and notices sent via the U.S. Postal Service. Sometimes, though, crooks take the paper route (like here, here, and most recently here).

If you suspect the tax notice you received is fake, call 1-800-829-1040 or visit a local IRS Taxpayer Assistance Center. You also can sign up to access your taxpayer account online and check there for any issues. And if you get a call or e-mail after receiving an official IRS notice, don't be conned into believing it's a follow-up to your legitimate interaction with the IRS.

Again, if you get a notice, don't freak out. Just deal with it.

The more quickly and thoroughly you do that, the less additional time you have to spend with the IRS.

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