A F B

Transcription

A F B
A TTORNEYS F OR B USINESSES
AND P ROFESSIONALS
3741 Westerre Pa rkwa y, Suite D
Richmond , VA 23233
www.wilsonstoyanoff.com
Phone: 804-622-6888
Fa x: 804-622-6891
Why it is so important to respond to that IRS notice.
Here is a disturbing scenario: you come home from work, go to your mailbox and find
the last thing you wanted to see - a letter from the IRS. So what goes through your mind? You
haven’t had any problems with the IRS before. Maybe you were just a little too aggressive with
your charitable deductions on last year’s tax return. Did they find out about the $100 you won
on that lottery scratcher?
What do you do now? Do your palms start to sweat? Do you even open the letter? Do
you throw it in your desk or side table and vow to get back to it “later, when I’m not so stressed
about it”? Do you toss it in the trash?
In spite of your natural tendencies, if you get the dreaded letter, DO NOT do any of the
above. No matter what the letter says, it is almost certain that you MUST RESPOND to the
letter, and soon. Here is why:
Most letters from the IRS are the result of an error on the tax return, which the IRS has
“adjusted” through their automated software analysis of the return. Many other tax returns go
through a “correspondence audit” where the taxpayer is asked to explain an item on the return or
provide additional supporting information. If you respond in a timely manner with the right
information, you may never hear about the matter again.
Typically, the envelope contains an examiner’s report along with a “notice of proposed
adjustment”, (a “30-day letter). The key word here is “proposed”: an IRS examiner may propose
adjustments to a taxpayer's return before determining a “deficiency” discussed below.
The examiner's report that IRS sends along with a 30-day letter must show the basis for
and amount of any proposed adjustments asks taxpayer to indicate, within 30 days, (hence the
name) whether he will:
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accept the findings and sign a waiver of restrictions on assessment which allows
IRS to collect the deficiency, and limits the taxpayer's appeal to a claim or suit
for refund;
request an Appeals Office conference; or
do nothing and IRS will send a statutory notice of deficiency.
In the 30-day letter, IRS must include an explanation of the entire process from examination
through collection, including the opportunity for administrative review in the IRS Office of
Appeals, as well as assistance available to the taxpayer from the National Taxpayer Advocate.
Responding to the IRS – Page 2
A statutory notice of deficiency (“90-day letter”) tells a taxpayer that IRS has determined
a tax deficiency. This is the only notice IRS will issue for that determination. It must describe the
basis for and identify the amounts of tax, interest and assessable penalties. After receiving the
90-day letter, the taxpayer can pay the deficiency, not pay and seek to rescind it, pay and file a
refund claim, take no action (let tax be assessed), or file a Tax Court petition and contest the
deficiency. (You have 90 days from the date of the letter to file a petition in tax Court, hence…)
If you believe your proposed adjustment is incorrect, it is critical that you respond to the
30-day letter within the allotted time. In my experience, the IRS will be open to reasonable
arguments in support of your position, and has the ability to resolve the matter without multiple
levels of administrative process and review. It is much more difficult to get the IRS to move
after the 90-day letter has been issued.
Your first step when you get the 30-day letter is probably to call your return preparer.
You should NOT do this on day 29. Give your preparer time to pull your file and get familiar
with the matter. He or she will be better able to help you craft a persuasive response if you don’t
wait to the last minute.
If you didn’t use a professional tax preparer, find an accountant or attorney with
experience in dealing with the IRS and make an appointment. This is even more important the
larger the proposed adjustment. Ask them about their experience with matters like yours so you
are confident that they are well qualified. Gather all of your tax information for that year and
bring it to the meeting. This will make their work more efficient and probably save you some
fees.
You may wish to handle the matter yourself, especially if it involves a small sum. That’s
fine – you could pay more in fees than the amount of the deficiency. But whatever you do,
RESPOND. And do it on time.