As the IRS is catching up on everything after the government shutdown, so are the amount of IRS notices that are going out to taxpayers whether it’s computer or human generated, simply because this is how our system works and there’s no way around it. Above all else you can’t just leave it in the sealed envelope and hope that it’ll go away, which has been the route for way too many people including my own clients. The other avenue that many people take is simply paying what’s on the notice without even questioning why it was received in the first place.
Some basic types of notices and letters sent typically are:
- There’s a balance due
- There’s a question about your tax return
- There’s a need for additional information
- There’s been a change to the return
- There’s a notification regarding a delay in processing the return
- There’s a failure of filing a tax return
Unfortunately, business owners often fail to recognize the fact that something could have been lost, misinterpreted manually, or a computer error causing the notice. Sometimes it may seem like a somewhat insignificant amount and it’s cheaper to just pay it instead of paying someone or doing it yourself to spend the time doing the research to see the value of a physical response or a telephone call. That’s perfectly understandable and everyone’s time does have a price on it.
On the flip side, when you’re seeking resolution, fear of being audited, or even wanting to respond on principle you still need to look at the justification of what you’re trying to achieve. Be aware that nothing can be always resolved 100% to your satisfaction, just like any customer a business owner deals with who may be unsatisfied with a product or service they are selling.
As an example, there was a client that was charged several years ago with a $12,000+ payroll tax debt that the IRS stated they had not received and with additional interest and penalties, it ballooned exponentially. After doing an initial review of the information, they chose to fight it because of the large amount. Well nearly 4 years later, multiple responses back and forth, as well as several delays because the IRS was reviewing the information and with each response from them required a response back from myself on behalf of the client.
What happened in the end was that the amount of research and response letters that were sent on behalf of the client, resulted in a savings of nearly 75% of what the initial first notice was requesting. Yes, it came out good in the end, and to the client it was well worth the fight. However again not every situation works out for the best, and it’s a judgment call that each business owner needs to make. But above all else, always respond, never ignore, and when in doubt always ask for clarification. As Ronald Reagan said, “Trust but Verify.”
Dwayne J. Briscoe