• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Wealth Pilgrim

No Money Worries. No Matter What.

Neal Frankle featured in
  • Home
  • Life Insurance
  • Investing
    • Build Strong Investment Building Blocks To Avoid Going Broke In Retirement
    • Systematic Mutual Fund and ETF Investing
    • Stock Market Investing Guide
    • Choosing the Right Investment Brokerage Guide
    • How Bonds Work Guide
    • How Banks Really Work Guide
    • Annuities – What You Need To Know Before You Invest
    • A Beginners Guide To Buying Individual Stocks
    • Create A Pool Of Great Mutual Funds and ETFs To Pick From To Secure Your Retirement
    • ETF and Index Fund Investment Guide
  • Earn More
  • Banking
  • Retirement Planning
    • Retirement Guide
  • Ask Neal a Question
  • Reviews
    • Upgrade Personal Loans Review
    • Lending Club Review
    • Prosper Review
    • Ally Invest TradeKing Review
    • CIT Bank Review
    • LegalZoom Review
    • Lexington Law Review
    • Airbnb Host Review
    • Should You Drive For Uber?
  • Tax
  • Courses
    • Raise Your Credit Score So You Can Buy a House – Free Video Course

Letter from the IRS – What You Should Do

by Neal Frankle, CFP ®, The article represents the author's opinion. This post may contain affiliate links. Please read our disclosure for more info.

Getting a letter from the IRS is almost never a pleasant experience. Even though I run a pretty tight ship when it comes to my tax return and I do everything possible to avoid a run-in with the tax police, I’ll admit that I get a little nervous when I see that the Treasury department wants to have a word or two with me. I do my best to avoid IRS audit flags, but sometimes they contact me anyway. There is an alternative to curling up in the fetal position and crying “mama” when you get a letter like this. Here’s how to handle a letter from the IRS:

Understand What’s Going On

In most instances, if you receive a letter from the IRS, they need clarification. It could be that a number they show on your file doesn’t jive with the tax return you prepared. This is called a “correspondence audit” and it’s a simple matter to resolve, but don’t ignore it. If you do, you run the risk of an eventual IRS wage garnishment or worse. Take care of business.

Simply supply the appropriate information and support documentation. If you end up owing more income tax than you reported, there will be penalties and interest charges…but you won’t be going to “the big house.” Don’t get excited. This happens all the time. There…I told you it wouldn’t be that bad.

If the situation is a bit more involved, you may be asked to come in for an office audit. If this happens, they’ll tell you when to come visit and what to bring with you. The IRS boys are going to go through your records very thoroughly, but it will typically be for only one part of your return. Sometimes during this process, the IRS agent will start quizzing you on issues they didn’t spell out in the IRS letter they sent. That’s a dirty trick and you don’t have to fall for it. Tell the agent they didn’t notify you there would be questions on those items and ask for a postponement. Then come back prepared. By exercising your rights this way, you can avoid IRS trouble down the line.

The third type of audit is a field or home audit. This time the IRS is going to come down to see you. These are pretty serious adventures. The IRS sends out their top guns to these audits, and you’re going to need extra protection too.

Should you call in a tax professional?

I must tell you that when it comes to the IRS, I am a chicken. I don’t respond to anything they send me without my CPA first reviewing it. Even if I get a correspondence audit (a simple letter requesting information), I fax it to my CPA and he takes care of it. You better believe that if I got a letter asking for an office or home audit, my CPA would hear about it.

Does it cost money to have a CPA help out with an audit?

Yes. But it’s the best money you could ever spend. The IRS employs some tricky people. They make money by tripping nice people up. I want a seasoned professional when I’m going up against these brutes.

Is having a good CPA to deal with IRS letters enough?

Sadly, no. In order to shield yourself from the wrath (deserved or not) of the IRS, you have to put a few other precautions in place:

1. Keep meticulous records. Have all your tax records, investment statements and cancelled checks (including the cancelled check showing you paid your taxes) for at least 10 years.

2. Take notes on all conversations with the IRS. That includes who you speak with, their identification number and what the recommendations are. Note the date and time you spoke with this person.

3. Avoid problems. More and more people are filing their taxes electronically, and you should do so as well. This is going to reduce the number of times human IRS eyes (is that an oxymoron?) actually review your document. That provides fewer opportunities for them to make a mistake. Also, since your payments are made electronically, it’s less likely that they will misplace your documents.

Have you ever received a letter from the IRS? How did you respond?
Auditflags
Tax Debt
?

Tweet
Pin
Share

Reader Interactions

User Generated Content (UGC) Disclosure: Please note that the opinions of the commenters are not necessarily the opinions of this site.

Comments

  1. Pollyanna says

    February 7, 2012 at 6:29 AM

    I have received the dreaded IRS letter a few times, all were reconciled with additional paperwork, and once a check for $ due. We shared a vacation home with another couple and had a written agreement we would share in financials – mortgage, interest, etc. but only one soc sec # went to IRS on the bank mortgage interest statement (and it wasn’t ours). Once I supplied IRS with the shared owner agreement nad a detailed letter, they were satisfied. Another time my husband’s former employer sent to IRS a wage tape that was for an old year, so it looked like he had earnings from them (he did not). That was corrected with supporting documentation from the former employer (obviously many people were affected). It is totally intimidating to receive the letter, but keep a level head and provide deep documentation and explanation. That has worked for us.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Are You Human? * Time limit is exhausted. Please reload CAPTCHA.

Primary Sidebar

Who is Neal Frankle

Neal Frankle

I'm a Certified Financial Planner™ with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim.
Read More »

Stay Connected

Facebook Twitter YouTube RSS

More Categories

Career Development
College Funding
Credit Cards
Credit Score Fixes
Money and Marriage
Debt Relief
Estate Protection
Property Investment Loans
Small Business Strategies
Spend Less Money

Disclaimer

Wealth Pilgrim is not responsible for and does not endorse any advertising, products or resource available from advertisements on this website. Wealth Pilgrim receives compensation from Google for advertising space on this website, but does not control the advertising selection or content. Please do the appropriate research before participating in any third party offers. The information contained in WealthPilgrim.com is for general information or entertainment purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation. Wealth Pilgrim does not provide investment advisory services and is not a registered investment adviser. Neal may provide advisory services through Wealth Resources Group, a registered investment adviser. Wealth Pilgrim and Wealth Resources Group are affiliated companies. In accordance with FTC guidelines, we state that we have a financial relationship with some of the companies mentioned in this website. This may include receiving payments,access to free products and services for product and service reviews and giveaways. Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.


About · Contact · Disclaimer & Privacy policy

Copyright © Wealth Pilgrim 2021 All Rights Reserved