Blog Layout

Letter From the IRS? 10 Things You Need to Know.

Letter From the IRS? 10 Things You Need to Know.

You walk out to your mailbox and there it is, a letter from the Internal Revenue Service. You open the letter with dread, because nothing from the IRS could be good, right?

 

Before you completely stress, it’s time to address some of the widespread misconceptions people have about the IRS. Keep these 10 things in mind the next time you receive something from them.

 

1. Don’t Panic

First, try not to panic when you receive mail from the IRS. There are several reasons they need to connect with you, and not all of them are negative. Often, the IRS needs to contact a taxpayer in reference to a specific federal tax return or a tax account or there could be changes to the account. The IRS could need more information about a particular part of the return. Sometimes, the IRS is informing you of an owed payment or status of an account. Before you let yourself react to receiving the letter, sit down and read the entire letter from beginning to end. This lets you know what the letter is about and what is required from you. 

 

Here are some common reasons why the IRS might contact you.

  • You are owed a larger or smaller refund.
  • You have an outstanding balance due.
  • You need to verify your identity.
  • You need to provide additional information or provide documentation.
  • The IRS changed your return.
  • The IRS has a question about your tax return.
  • There is a delay in the processing of your return.
  • The IRS has updated your account, such as a mailing address.

 

2. Never Ignore IRS Letters

If the IRS has sent you a letter, there is a good reason for it because letters are not sent out frivolously. Never ignore a letter from the IRS. The majority of IRS letters are about a specific tax return or an account. The IRS will also send you a letter for each specific issue. This means you could get several letters, each outlining a different issue. Never throw away a letter assuming you already know the topic because of a previously received letter.

 

3. Beware of Scams

The IRS will never contact taxpayers through any method other than by mail or phone. The first point of contact is almost always by mail in the form of a letter. The IRS will not contact taxpayers through text message, email, or social media. Any attempts at contact through these methods that ask for personal information are not from the IRS. If you have any doubt over the legitimacy of the contact, you can look up your tax account information on the IRS.gov website.

 

4. Check the Information

Do not blindly trust the information included in the IRS letter. The IRS is run by humans, and they can make mistakes. It is always good to double-check the information stated in the letter to verify its accuracy. If you find that the decision or information is incorrect, you need to respond to the IRS with the correct information. This is called a dispute letter, and you should also include any necessary documentation to supplement your dispute.

 

5. You May Not Need to Reply

Letters are the main method of communication for the IRS. Not every letter requires a response. If the IRS needs to inform you of an action it took, then you will receive a letter. If the IRS sends you a letter informing you of a change or correction to your tax return, then you do not need to reply if you agree with the correction and there are no instructions for further action or payment.

 

If you do need to reply, this typically involves writing a response letter, filling out a form, or submitting documentation. There will be a tear-off portion on the notice that you will include with the response or payment and send it to the address on the upper left-hand corner of the letter. 

 

6. Pay Attention to Deadlines

If your IRS letter requires a response, do not wait. Your letter will typically outline the deadline that you need to reply by. Waiting and not responding in a timely manner can lead to additional penalties and fines. Additionally, a timely response can help minimize the additional interest that accrues on the amount of taxes you owe.

 

7. Always Make a Copy

Always make a copy of any letter you receive from the IRS. First, this gives you multiple copies so that you can include one in your response. Or you can submit one to a tax professional that you’ve hired to help you. Keeping two copies of your letter also ensures that you do not lose your documents and have a complete record of your correspondence with the IRS. Should something happen to your first set of documents, you have a backup. Additionally, save the documents for at least seven years. This ensures you have an accurate record should anything arise in the future relating to the current issue at hand.

 

8. Follow Directions

Carefully read your letter and follow the directions outlined. Not following the included directions can lead to increased penalties and fines owed because it delays the process as the IRS thinks you did not respond in a timely manner. For example, send any responses to the listed address on the letter. The IRS has many offices, and you need to send your correspondence to the correct location.

 

9. Seek Out Assistance

While you can read and respond to letters from the IRS on your own, you do not have to. There are tax experts that can help you. Seeking assistance from one of these experts can give you insight and guidance into the letter. Despite being told not to panic, it can be hard not to. Working with a professional can assuage these feelings by giving you the confirmation needed to calm your nerves. If your letter references something more serious, your hired professional can provide you with the necessary guidance to handle the situation appropriately.

 

10. Be Patient

When you send a correspondence letter to the IRS, it can take time for them to process everything. It can take up to 30 days for the IRS to process your response and issue a follow-up letter. Responses can take even longer due to the post-Covid backup. While you do not need to follow up on the status of your response, you can call the IRS toll-free numbers to get a status update. If a particular person from the IRS is handling your issue, then it is possible their direct line is on the letter. It will be in the upper left corner.

 

Address Your Letter From the IRS

If you have received a letter from the IRS, then it is time to act. Do not panic but read your letter carefully and determine the purpose of the letter. If it is just a notice and requires no action, then you’re done. If you need to respond, make sure to do so by the stated deadline. If you feel confused, overwhelmed, or just want a second opinion, consulting with a tax professional can provide you with much-needed guidance.

 

With decades of experience dealing with accounting, tax, and legal projects, the Landra Raymond & Associates team can help. Contact our firm today and let our skilled professional assist you with your letter from the IRS (and more). 

Key 2025 Business Tax Dates

By Ellicia Martinez • January 21, 2025
Are you working with a trusted accounting team to ensure you're ready for key 2025 business tax dates?

Q4 2023 Estimated Tax Payments Due 1/15/24

By Sarah Robles • December 13, 2023
Are you ready for the last quarterly tax payment of 2022 as a business owner? - January 15: Q4 2023 estimated tax payment due With decades of experience dealing with accounting, tax, and legal projects, the Landra Raymond & Associates team can help ensure you're ready for deadlines.

The Last Major Business Tax Deadline is October 16

By Sarah Robles • September 22, 2023
The last major business tax deadline is October 16, when your extended C-corporation returns are due. Are you ready to submit everything to the IRS? With decades of experience dealing with accounting, tax, and legal projects, the Landra Raymond & Associates team can help ensure you're ready for deadlines.

Extended Partnership and S-Corporation Returns Due September 15

By Sarah Robles • August 25, 2023
Are you ready to submit your extended partnership and S-corporation returns? The deadline is September 15, and will be here shortly. With decades of experience dealing with accounting, tax, and legal projects, the Landra Raymond & Associates team can help ensure you're ready for deadlines. The next deadline is Oct 16: extended C-corporation returns due.

Next Quarterly Tax Payment is September 15

By Landra Raymond • August 25, 2023
Are you ready for the next quarterly tax payment deadline as a business owner? - September 15: Q3 2023 estimated tax payment due - January 15: Q4 2023 estimated tax payment due With decades of experience dealing with accounting, tax, and legal projects, the Landra Raymond & Associates team can help ensure you're ready for deadlines.

Q2 2023 Estimated Tax Payments Due 6/15

By Sarah Robles • May 17, 2023
Are you ready for the next quarterly tax payment deadline as a business owner? - June 15: Q2 2023 estimated tax payment due - September 15: Q3 2023 estimated tax payment due - January 15: Q4 2023 estimated tax payment due With decades of experience dealing with accounting, tax, and legal projects, the Landra Raymond & Associates team can help ensure you're ready for deadlines.

Are you prepared to send everything to the IRS?

March 22, 2023
Taxes for C-Corporations are due on April 18. Are you prepared to send everything to the IRS? With decades of experience dealing with accounting, tax, and legal project s, the Landra Raymond & Associates team can help ensure you're ready for deadlines. Future deadlines include: - Sept 15: Deadline for extended partnership and S-corporation returns - Oct 16: Deadline for extended C-corporation returns

Are You Ready for Quarterly Tax Payment Deadlines?

March 15, 2023
As a business, are you ready for quarterly tax payment deadlines? - April 18: Q1 2023 estimated tax payment due - June 15: Q2 2023 estimated tax payment due - September 15: Q3 2023 estimated tax payment due - January 15: Q4 2023 estimated tax payment due With decades of experience dealing with accounting, tax, and legal projects, the Landra Raymond & Associates team can help ensure you're ready for deadlines.

Key 2023 Tax Dates for Businesses!

By Landra Raymond • February 15, 2023
Are you ready for key 2023 business tax deadlines? - Mar 15: Taxes due for some business types (partnerships, multi-member LLCs, and S-Corporations) due - Apr 18: Taxes for C-Corporations due - Sept 15: Deadline for extended partnership and S-corporation returns

As a Small Business, Are You Prepared to File Your 2022 Taxes?

By Wendy Gray • January 25, 2023
As a small business owner, you wear many hats, from accounting to sales. Managing all business aspects can be stressful enough, but then tax season comes along. While some people may worry, filing taxes doesn’t have to derail you. By preparing early, you can be confident that you have handled tax season. Separate Personal from Business Small business owners' biggest mistake is mixing their personal and business expenses. Not only does this expose your personal assets to unnecessary risk, but it also makes managing your finances more difficult. If you haven’t done so already, separate your personal and business expenses and open different accounts for the company. Funnel all payments and costs for the business through these accounts. Do not use your personal cards for the business. Instead, take out a separate credit card in the business name. Gather and Organize Your Records You can’t begin to file taxes if you don’t have your documents in order. The best solution is to organize everything from the beginning, but not every small business owner does this for various reasons. If you fall into this category, try starting sooner rather than later, or you may encounter delays in filing. Digitize Protect your documents by making a digital copy of them. Save PDF files for all your receipts, purchase orders, and accounting-related documents. You can then organize the documents into folders, making it easier to find what you need months or even years later. It also saves you from carting a large box of papers around. Use Accounting Software If you haven’t already done so, start using accounting software for the business. This gives you a centralized location where you can manage all your business accounting in one place. Look for software that is designed for small businesses. It should be simple to use, affordable, and scalable to grow with your business. Review Payroll If you are the only person who works for your business, you can skip this step unless you are paying yourself a W2. You will need to review your payroll if your small business has employees. Your business should have remitted taxes, which means withholding a percentage of each employee’s paycheck for tax payments. If you or your payroll service didn’t withhold taxes, your business could be on the hook for these, which could inflate your tax liability. Collect Documents Whether you file your taxes or have help from an accountant, you will need all your business documents to file taxes correctly. Making sure you have everything organized and ready when you meet with your accountant will make things easier for everyone. Taxpayer identification number (EIN or SSN) Income statement Balance sheet Receipts Bank statements Credit card statements Payroll records Previous year’s tax return Estimated tax payments Check Your Deadlines Everyone knows April 15 as Tax Day. However, this isn’t the only deadline that the IRS has. The deadline could be different depending on what you are filing and the entity under which you are filing. For example, if you are self-employed, your final deadline for making an estimated tax owed payment is January 17, 2023. Your federal tax return filing deadline can differ depending on your small business formation. Sole proprietorships: Schedule C and personal tax return: April 17, 2023 Partnerships: IRS Form 1065: March 15, 2023 Multimember LLCs: IRS Form 1065: March 15, 2023 S-corporations: IRS Form 1120S: March 15, 2023 C-corporations: IRS Form 1120: April 17, 2023 Similarly, extension deadlines can vary based on your small business filing status. While you may have the best intentions to file your business taxes on time, this doesn’t always happen. Do not rush to file a tax return that isn’t complete and correct. Instead, filing for an extension can give you extra time. Sole proprietorships: October 16, 2023 Partnerships: September 15, 2023 Multimember LLCs: September 15, 2023 S-corporations: September 15, 2023 C-corporations: October 16, 2023 Finally, if your small business has employees or works with independent contractors, be aware of the January 31 deadline, which is the day you need to send out W-2s and Form 1099-NECs. Consider Tax Deductions Businesses can claim different tax deductions than individuals. These can vary based on your business filing status. Your accountant can help you understand what deductions and credits are available to you. Below are some of the common deductions that are available to small business owners. Business mileage Home office deductions Travel deductions Disabled access credits Small business health insurance tax credits Charitable contribution deductions Hire a Professional Tax law can become an overwhelming and consuming web of regulations. Rules can change from year to year, making things even more confusing. Because of this, you shouldn’t assume that everything is the same as in previous years. Talk with a tax professional who can guide you on the latest tax changes. They make it their job to know the changing IRS laws and how they might affect their clients. As tax deadlines loom closer, tax professionals’ schedules become more hectic and demanding. Scheduling your consultations and meetings early helps you get ahead of the ball and avoid unnecessary stress. Check Your Business Filings Before filing your taxes, check your business status to know what forms you’ll need. Additionally, this is an excellent time to confirm your business status. All too often, individuals choose a business status and then never look at it again. This can create problems later. For example, a sole proprietorship may have been the best choice when you first started the business. However, a few years in, this may no longer be the best status for your small business. Tax season is a good time for this evaluation because you can compare tax liabilities. You may find that your future planned small business growth should also include changing your business status. Can You Afford Your Tax Liability? Depending on your situation, you may find yourself owing the IRS. If this happens, you need to have a plan for how you will pay. You'll need to arrange for payments if you can’t afford to pay your tax liability in one lump sum. There are a few options available. Arrange for a monthly installment payment to the IRS Offer a compromise (tax debt settlement) Request a payment postponement Get Ready for the Next Tax Season With the new year starting, there is no better time than the present to start prepping for tax season. Start by gathering your financials and tax documents. Get your business records in order. Confirm your business status and the applicable deadlines. Once you have everything in order, reach out to a professional. They can help you determine what’s missing and prepare your tax documents for the filing season. Schedule an appointment today and get ready for the next tax season with our team of experienced professionals. 
More Posts
Share by: