Now that most people have filed their tax returns, it is likely that many taxpayers would be receiving mail from the U.S. Internal Revenue Service (IRS). Some notices are for informational purposes only, which do not require a response, while some notices require immediate action. It is advisable that taxpayers should check all mail received from the IRS and act accordingly, however precaution should be taken to not fall prey to fraudulent mail and phishing scams.
The IRS sends notices only in certain situations so being informed can help avoid falling into any traps. Here is a brief overview of the notices sent by the IRS and what needs to be done summarized by AG Tax return preparers to inform taxpayers about these various notices.
Proposing a Tax Adjustment
Once a tax return is filed, the IRS will review it for errors and notify the taxpayer of the tax adjustments in case there are any discrepancies in the tax estimated by the taxpayer and the IRS. This may occur due to the difference in the income amount reported. In some cases a taxpayer may fail to report a small amount of income, where the details of that income may be available to the IRS through an investment firm or broker. The initial step should be to analyze the tax notice and contact the IRS for clarification.
Mismatched Tax Amounts
As mentioned above, there may be the tax calculated by the IRS and the tax paid by the taxpayer. In such cases if the tax due is lower, the IRS will notify of the refund to the taxpayer while if additional tax is calculated, the taxpayer would be required to pay the excess. However, if the taxpayer thinks that the re-calculation is incorrect, he/she may respond to the IRS notice to dispute the IRS’s calculation and to clarify their original calculation (or provide supporting documentation). The IRS will review the information provided and if it agrees the issue will be resolved. If the IRS thinks that it is still correct, then the taxpayer may need to further challenge the issue through appeals or even tax court. It is highly recommended to consult a tax professional in such scenarios.
Incomplete Reporting of Income or Other Tax Items
There may be certain situations where a deduction or credit has been claimed or calculated incorrectly resulting in a difference between the tax payable to the IRS and the tax amount paid by the taxpayer. In such cases either the IRS may directly issue a notice with the new tax amount or send a notice asking for explanation or additional information in support of the amounts. It is advisable that the taxpayer inform his/her tax return preparer as he/she should be able to provide assistance in an appropriate manner making it easier for the IRS to understand and thereafter take actions as necessary.
There may be situations wherein the IRS may send notices seeking tax-related information. These are just some of the common IRS notices. Additionally, taxpayers should keep in mind that any IRS notice will first be sent by mail via the U.S. Postal Service. The IRS does not initiate contact by phone before sending a notice, therefore if the taxpayer receives a phone call before receiving any notices stating it is from the IRS, it is likely a scam, and the taxpayer should avoid disclosing any tax-related information, such as: ITIN, SSN, PTIN, etc. or financial information, such as bank accounts. Therefore it is important that you keep your mailing address with the IRS up to date.
In addition note the IRS will never:
- Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill;
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe;
- Require you to use a specific payment method for your taxes, such as a prepaid debit card;
- Ask for credit or debit card numbers over the phone; or
- Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
If a taxpayer gets his/her return filed by a tax professional, it is best to contact the tax preparer regarding any notices received from the IRS. Always remember, ignoring an IRS notice and delaying your response will never help your tax situation.
AG Tax LLP Can Help
Tax situations can be complex and burdensome, if you have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canadian, and other international tax laws.
We can assist with:
- Canadian Personal and Corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.