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How to Effectively Respond to an IRS Notice

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The IRS sends out millions of notices every year to correct tax returns, request more information from a business, update taxpayer information, verify a taxpayer’s identity, and more.

As a small business owner, you are likely to be the recipient of one of these requests for information at some point in the lifecycle of your business.

Don’t panic, it is a common occurrence.

There are many reasons for IRS to send you a notice, so do not assume it means you are in the wrong. Follow these steps to effectively respond to any IRS notice:

  1. Keep your cool. A notice from IRS is not always bad news. It could be announcing changes to your account or requesting basic information about your business. Remember that IRS primarily communicates with businesses through the mail — phone calls or emails claiming to be from IRS are likely to be scams. Given that postal mail is their preferred communication channel, your notice may be a simple notification and not necessarily a bill. 
  2. Read the document carefully. Take the time to read (and reread) every word in the notice. Most notices make an effort to present the important information in a clear and direct way; so even if other parts of the message remain confusing to you, try to identify the primary goal of the notice. Once you get a sense of why IRS has contacted you, you can decide how to proceed. 
  3. Reference the notice number. All IRS notices contain an identifying number that appears in the upper right-hand corner or bottom right-hand corner of the document. These numbers indicate the type of notice. If you need more information about why you received your particular notice and what the request is, look up the number or contact a tax professional to help clarify.
  4. Find out what is required of you. Not all notices require you to respond, but many do. Figure out what course of action, if any, is required on your part – supplying specific information, answering certain questions, amending your tax return, paying a bill, etc. If you are not sure what is being requested or how to proceed, now is the time to contact a qualified tax attorney. A professional can help you plan your response in a way that protects your business’s interests. 
  5. Reference your records. There are many reasons for IRS to send a correction notice, including insufficient or late tax payments, accrued penalties, or outstanding debts. Compare the IRS request to your tax return to determine if the correction has merit. If you believe the request does not have merit, work with a dedicated tax attorney to appeal your case to IRS. If the request is valid, a tax attorney can help you respond to IRS in a way that resolves the matter while protecting your business. Either way, do not ignore the notice.
  6. Stay on schedule. You generally have 30 days to respond to an IRS notice. You need to respond regardless of whether you agree with the conclusions of the notice or not. Ignoring the notice, refusing to respond, or responding past the deadline will not help your situation. A delayed response may incur penalties or additional interest.
    If the notice requests very basic information and you do not dispute the request, you can send the information on your own. If the request is more complicated or contentious, get in touch with a tax attorney quickly so you can respond appropriately and meet the 30-day deadline.
  7. Copy and save your documents. You may need to send along specific documents when replying to a notice. Make a copy of any documents before you submit them to IRS. Never send your only copy. If you have questions about what you need to supply and how it could affect your business, work with a tax attorney before responding. In the same vein, keep copies of every notice you receive from IRS, along with copies of any response you send. To stay organized, file these documents with the corresponding tax returns. 

A Tax Attorney Can Help You Respond to IRS

If you are uncertain about any part of your IRS notice, reach out to a professional tax attorney who can guide your course of action and advocate on your behalf. 

At Milikowsky Tax Law, our team of experienced tax professionals fight to defend our clients’ legal rights against meritless collection efforts from IRS and state tax agencies. If you have a high tax balance, we will help you maintain control of your personal and business assets, understand your options, ward off penalties, and regain financial stability. If you simply need help understanding what your IRS notice is asking, we will guide you in navigating and responding to IRS appropriately. Do not hesitate to call us; we are here to help you keep your business in business.

Contact Milikoswky Tax Law for a free consultation.