The Dreaded Letter From the IRS

It is a part of just about all of our daily habits. We stroll out the mailbox to see what interesting bit of mail we got. As you dig through the junk mail, you see a few bills and an ominous looking letter. Egad, it is from the IRS. A dear john letter of a different sort.

Thick letters from the IRS are pretty much the norm. This is particularly true if you own a business. The thick letters are full of forms. Ah, but what about a thin letter from the agency? This is typically nothing but bad news.

The dreaded thin letter from the IRS promises misery in all its simplicity. It is usually a one page statement, but packs the punch of a tank. Why? The IRS notice is issued under only one circumstance. The agency has found something wrong with your taxes.

Now, it can be said in truth that the ubiquitous notice sometimes is a good thing. The problem can be that you paid too much money. I had this happen once. Eighteen dollars. This is, however, admittedly a rare event and the news usually is not positive.

The bad news is you are probably being audited if you receive this letter. Go ahead, cry. Let it out. Once you are done, actually read the full letter. The audit may not be the torturous event you are imagining. In fact, it rarely is.

A vast majority of the time, the notice will be for what is known as a correspondence audit. This means the IRS is contesting something about your taxes, but is willing to give you the opportunity to deal with it by mail. That means no grilling by an agent.

With this type of inspection, the IRS tells you point blank what it is having a problem with in regard to your taxes. The agency will usually suggest a way it can be resolved and any impact on what you owe. There is no person to person interaction.

You can respond to the correspondence audit in a couple of ways. First, read it to see the options offered. Typically, you can accept the proposed changes by doing nothing. If don’t agree with them, you can respond in writing as to why.

Most of the proposed changes from the agency are deemed acceptable by taxpayers and the just accept them. If you fall into this category, you can end the audit by doing with the agency asks. If you don’t, you can fight the IRS with all that entails.

If you receive one of these letters from the agency, don’t feel like you are being picked on. The IRS sends out millions of them each year to handle issues with taxpayers. If you get a particularly nasty one, go talk to a tax attorney so you know your rights.

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