ROCHESTER, N.Y. (WROC) — Many taxpayers receive notices when a taxing agency like the IRS flags problems on their tax returns.
CPA Chris Gamble of RDG+Partners discussed what can prompt a red flag and what you should do if it happens to you Thursday during News 8 at Sunrise.
“The IRS alone sends millions of notices to taxpayers every year,” said Gamble. “When the IRS or a state taxing agency needs to contact a taxpayer, they typically send a letter to the last known address via the US Postal Service. The IRS does not initiate contact with taxpayers via email, text message, or social media. In rare circumstances, an IRS Revenue Officer may call or physically visit a taxpayer before mailing a notice, but this is the exception rather than the rule. It is important to know IRS representatives all carry a government identification card to verify their authorization.”
Gamble said notices are typically issued for discrepancies on the return that often revolve around resolving the differences between a number from a third-party provider, like a bank, and the number on the actual return. But there are scams. “We all know that many scammers use sophisticated methods to make their contact look and feel like it is legitimate. There are a few things scammers typically do that are not part of the taxing agency’s process that can help someone determine if the notice is legitimate. The taxing agency does not demand immediate payment, so if during the first contact they are requesting payment or a specific type of payment, such as prepaid debit card, gift card, or by wire, be wary. Also, the IRS will only request payment be made to ‘United States Treasury,’ so if you have a different payee, this is a red flag. Taxpayers are always given an opportunity to respond to the notice and provide additional information to help resolve the matter in the notice. Also, the IRS does not threaten to bring local police, immigration officers, or other law enforcement agencies to arrest people for not paying taxes.”
If you receive a notice, Gamble said don’t panic. “Most notices can be resolved with one response by sending additional information to the taxing agency. Take time to read the notice and understand what it is about. There are many reasons why the IRS may send a letter or notice. It typically is about a specific issue on your tax return. A notice may tell you about changes to your account or ask you for more information. It could also tell you that you must make a payment. If you worked with a paid preparer, you can contact the preparer to help with your response. The notice will often specify additional information and a due date to send a response. Don’t ignore the notice and hope it goes away, because the taxing agency will continue to contact you and has the authority to levy bank accounts or garnish wages if they believe you owe additional taxes and you do not provide the information to prove otherwise.”
Gamble said if you agree with the notice and the changes included, then you can sign the notice to confirm your agreement and send payment and be done. If you disagree, the notice will give you a specific date when you need to respond to have additional information considered that may change the assessment in the notice. You should prepare a written response to explain why you disagree and include any information and documents you want the IRS to consider. You can expect a reply to your response but plan to wait at least 30 days for a response. “Taxpayers have the right to have someone else, such as a CPA, Enrolled Agent or attorney represent them and discuss the notice on their behalf with the taxing agency,” explained Gamble. “This will require a signed Power of Attorney Form where the taxpayer specifically authorizes the taxing agency to communicate with the representative on behalf of the taxpayer.”