Tax expert Eva Rosenberg explains what to do if you receive an audit notice from the IRS this holiday season.
By now, you have filed your 2017 tax returns. If you were smart, you waited until sometime close to October 15th to take advantage of cleaning up your accounting and records – and funding retirement plans. So, right about now, the IRS will start sending out their notices, with corrections to your tax returns, alerting you about missing information, or trying to collect your balance due. Or worse, an audit notice, now that they know what you did, or didn’t, report on your tax return. Uh oh! What should you do now?
Here are some simple steps for when you receive an audit notice:
1) Open the notice. You think that’s too simplistic? Talk to any tax professional. We will tell you about the envelope-opening ceremony we go through with new clients who have stacks of IRS or state notices that they have never opened. (Some envelopes even contain checks.)
2) READ the notice. Don’t skim it. The IRS, believe it or not, has tried to simplify the notices and make them easier to understand. They are not, really. But if you scour the information, you will learn what the notice is about and what you’re expected to do. Consider highlighting the important parts.
3 a) If you are handling the responses yourself, you can look up the notice and what it means on the IRS website. Just go to this page and enter the notice number in the search field
3 b) If you have a tax professional, turn the notice over to your tax pro immediately. That means now, not three or four weeks from now, after the response deadline has passed. Your tax pro probably has a secure cloud server where you can upload a copy of the notice, or you can fax it. Just let them know it’s coming. Under no circumstances should you read the entire notice to them. We know what the notices are about. Just tell them the notice number.
4) Where do you find the notice number? You will find the number in the top right-hand corner of the notice. It will say something like CP-2000, or CP-504, or some other CP number (CP means computer program).
5) Respond to the notice on a timely basis – before the deadline shown on the notice, often 30 days, sometimes only 10 days if the IRS is about to levy your assets. Most of the time you can resolve the problem with one phone call (if you have the patience to wait on hold) or one letter – or a check. Sometimes, the response may be more complex and may need the help of a tax professional. If you’re not working with anyone and don’t really know what to do, Ask TaxMama. Just post your question on the TaxMama® website and you will get an answer, for free. Do not post personal information or ID numbers.
For more details on how to deal with the notices, read Small Business Taxes Made Easy, Chapter 13 – Tax Notices, Audits and Collection Notes.
Known as TaxMama®, Eva Rosenberg’s frankness, sense of humor and casual, chatty delivery makes her a welcome talk show guest and speaker around the country. An Enrolled Agent, licensed by the IRS and the U.S. Treasury Department, Eva is the publisher of TaxMama.com, and the author of Ask TaxMama® and Small Business Taxes Made Easy. Her TaxQuips podcasts also keep people entertained and informed.