 Internal Revenue Service IRS tax news. Taxpayers should open and carefully read any mail from the IRS. That phrase is clearly worded in IRS bureaucratic passive talk. Let me be more specific putting this statement in plain English. When receiving an IRS correspondence, resist the powerful urge to tear up, crumple up, scream at, enrage, spit on, or in any other way damage the correspondence or cause disturbance or harm to those who just happened to be around you when you encountered the offensive IRS letter. IRS tax tip 2022-62 April 21st, 2022. The IRS mails letters or notices to taxpayers for a variety of reasons including although all these reasons are basically subcategories or sub reasons of the master category or the one reason of the IRS wants something from you, usually money and or information. So here are the subcategories under that master category of what they might be looking for. They have a balanced due. So if you owe the IRS money, you might get a letter from the IRS as they request the money that is due. They are due a larger or smaller refund. So if they make a change to the amount that is going to be refunded, possibly they see a change or something doesn't line up on your tax return compared to the information they have such as differences in the W-2s or the 1099s or they make some other type of adjustment. Typically they will tell you in the letter that they've made that type of adjustment and you can then see if you agree with it or not and you can possibly have recourse if there's an argument in alignment or under the law at that point in time. So they got to make you aware of that and hopefully they usually do a pretty good job of that. The agency has a question about their tax return. So if they're questioning something about the tax return, they might want more information about that information that you gave them on the tax return. They need to verify the identity so they need to know who you are. They're not doing the facial recognition thing anymore. I don't think so they're not trying to like take over the world or control everything. At this point they backed off a little bit but they still want to know who you are. So the agency needs additional information so they might need more stuff from you. The agency changed their tax return so if there's a change to the tax return itself then again the IRS will typically give you a letter telling you what those changes are and then you can agree with that or disagree with that. You have the capacity possibly to argue with the IRS but if you are to argue you have to do so generally within the context of the law. So the IRS needs to be taking action within the context of the law. So if you have an argument with the law then that's a legislative thing right? Then you've got to hire, you've got to vote in different people to stop making silly laws and whatnot. So if a taxpayer receives an IRS letter or notice they should not ignore it. Don't ignore it so you don't want to do that because if you do that then if you owe them money or information and you're not in compliance then what will happen is nothing at the start typically because it's a slow moving bureaucratic system but eventually they're going to roll that stick down some hill that builds up the material on it so that you get a big stick and then they hit you with it sometime and that stick metaphorically known as, as we know at this point, penalties and interest. So ignoring it, especially if you can't pay a bill, is a natural thing to do. You're saying I can't do anything about it, I'm just going to let it go until I can do something but you can do something, you can at least respond to it and set up a payment plan to it so if you owe them information you can try to give them the information or at least respond back and say I can't get you the information and as long as you're in correspondence with the IRS then they're usually not at least going to go to collection action at that point in time, right? That usually means that you're in a better situation from a negotiation standpoint even if you just correspond and basically do nothing, you just say I acknowledge that you sent me a letter and I'm not going to do anything at this point in time, right? It's going to be better, at least they got a correspondence, they're not going to like that for too long but at least you're doing, at least you did something there. If you owe any money then you probably want to get a payment plan set up because that's going to be lowering the penalties and the interest. So most IRS letters and notices are about federal tax returns or tax accounts. The notice or letter will explain the reason for the contact and gives instructions on what to do. Not panic, don't panic when you get the letter. Don't panic, no hard attacks around here. So the IRS and its authorized private collection agencies generally contact taxpayers by mail. Most of the time all the taxpayers needs to do is read the letter carefully and take the appropriate action. That's all you got to do. Just read the letter and pay us our $10,000. I mean, there's no need to get like panicky about this whole thing. In any case, read the notice carefully and completely. If the IRS changed the tax return, the taxpayers should compare the information provided in the notice or letter with the information in their original return. So if they made a change to the return, it's likely that they have other information. So possibly things that they can change quite easily. If you put something like a miskeyed something or put something wrong in place, they have the W-2s, they have the 1099s. So that means that if you didn't report something correctly or misreported it or didn't report a 1099 or W-2, for example, they're likely to give you a letter saying you owe more money usually because those things would usually be an increase of the tax. They've got the 1098s as well and they also have information from other people. So clearly one of the things that people often have questions about is two people say claiming the same dependent or something like that is another kind of thing that can cause problems that the IRS can pick up quite easily. They don't need to really do a full audit to look in and dig into that kind of stuff. They don't even need manual people to find it out because they got the system set up where they're getting the W-2s from the employers and the people that are paying and they can kind of line that up to what you reported and if there's a change then you might get a letter on that. So in general, there is no need to contact the IRS if the taxpayer agrees with it. So you can't argue with the IRS if they did something that's not correct but you have to argue within the context of the tax code. So you can't be like, well that's not fair because I think, you know, justice whatever, right, you got to say, well no, the tax, you made a change that isn't in alignment with, you know, what the tax code says and this is why and then that's kind of the context you would argue it. If they're right within the alignment of the tax code then there's not much you can do. So respond timely. If the notice or letter requires a response by a specific date, taxpayers should reply in a timely manner to avoid delays in processing their tax return, minimize additional interest and penalty charges, preserve their appeals rights if they don't agree. So you want, if they, usually it's the kind of interval, the slow bureaucratic process they give you a letter and then they give you like 30 to 60 days to respond and so on and then you respond and then they give you a letter back and it's just big, you know, slow email, snail mail, I mean not email, snail mail correspondence and but if you don't, so it's not really that if you keep on top of that, it's not really that big of a problem to at least be in compliance with the correspondence with them. But if you don't, then you're going to start to charge most likely you might get penalties and interest rolling up and that creeps up, it's the creeps up the stick. You're like, wait, how did that stick get so big that you just hit me with? That's because it just slowly creeped up on the penalties and interest and you also again have more negotiation capacity if you're in correspondence with the IRS than if you kind of, if you just drop off of communication with them all of a sudden. So pay amount due, taxpayers shouldn't pay as much as they can even if they can't pay the full amount. So why? Because you're trying to avoid the penalties and interest. It's not like, you know, you could think of it this way. It's like, well, it's because it's your patriotic duty to do that. Okay, but you're also trying to avoid the penalties and interest. So how do you do that? Well, the system is of course set up that if you pay more than you get less penalties and interest. If you're in compliance, then you're more likely to be better off than if you're out of compliance. That's just how that's set up, right? So people can pay online or apply online for a payment agreement. If you can't pay, then that's when people get into trouble because then they just say, I'm just not going to do anything because people are probably in that situation due to the weirdness in the last two years than other times. And so if it's the first time where you're just saying, I can't pay. It's like, it's a weird situation for me at this point. I'm just not going to file my tax return. That's not what you want to do. Typically you want to set up the payment plan, which you could pretty much do online. You don't even need to talk to anyone. Just go to the IRS website, usually, and you can figure out how to set up a payment plan so that you can reduce the penalties and interest related to it and be in compliance and then not have to stress out and whatnot. So including installment agreements or an offer and compromise. So the agency offers several payment options. There's a link to the payment options here. Keep a copy of the notice or letter. It's important that taxpayers keep a copy of all notices or letters with other tax records. They may need these documents later. So if you crumple it up, if you tear it up, if you spit on it and whatnot, then it might smear up the writing so you can't really see it that good. And plus, if you give it to your tax professional and it's all gross, you know, they're not going to like that. But you might be able to find the letters on your IRS website too these days as well. So if you do happen to lose the letters and you can log into the account, you should have hopefully access to correspondence on there as well. But you typically want to hold on to the letters. Remember, there is usually no need to call the IRS, so they don't want you to call them. In case you haven't noticed this, they're trying very hard not to actually physically talk to people in part because they're short on staff and I think they're still dealing with these weird rules with the COVID stuff, which are basically they try to top down, do that thing, and that means it happened on the top and it didn't happen so much down the line. So the IRS is kind of, I think, somewhat more hampered than others possibly with the whole restriction weirdness. So if a taxpayer must contact the IRS by phone, they should use the number in the upper right hand corner of the notice. The taxpayer should have a copy of their tax return and letter when calling. Typically, taxpayers only need to contact the agency if they don't agree with the information, if the IRS requests additional information, or if the taxpayer has a balance due. Taxpayers can also write to the agency at the address on the notice or letter. Taxpayers replies are worked on first come, first served basis, and will be processed based on the date the IRS receives it. So, you know, when you get the correspondence clearly, they're going to have the place to mail it because the IRS isn't like in one office, right? There you go, you know, they got places all over the place. So make sure when you're getting back to the IRS, you want to look at the correspondence that you have been receiving to respond back to the appropriate place to get back to them. So more information on this wonderful topic of discussing and keeping in communication with your good buddies, the IRS is here. So you got the understanding, your IRS notice letter, tax topic 652 notices, what to do, tax topic 653 IRS notices and bills, penalties, interest charges, tax topic 654 understanding your CP75 or CP758 notice request for supporting documentation. There's links to that wonderful reading information here, and there'll be a link to this in the description.