5 Steps to Take When You Receive a Tax Letter or Notice

Regardless of the size of your business, tax compliance can be a heavy burden. When you need business tax help, rely on Collins Legal, PLLC.

Regardless of the size of your business, tax compliance can be a heavy burden. In fact, two-thirds of business tax compliance costs fall on businesses making less than $1 million in revenue. However, even the most scrupulous business can receive a notice or letter from the IRS. Occasionally, these letters deliver good news; much of the time, these letters request additional information or assert that your business owes additional taxes. A letter from the IRS can be overwhelming, but here are five steps you can take to deal with a letter or notice from the IRS:

Do Not Ignore It

It may be tempting to stuff the unopened letter into the bottom desk drawer and try to forget about it. Tempting, but foolish. The IRS has a lot of power to collect taxes and ignoring a notice risks turning a small problem into a catastrophic problem. Even if your stomach is churning, you should open the envelope and prepare yourself to deal with its contents.

Read Carefully

The IRS is bound by certain rules that require it to provide notice of any action it intends to take and allow you an opportunity to respond. The notice or letter you receive from the IRS will likely contain the following:

Description of the basis for the letter, including the specific tax filing the letter pertains to. For example, the letter may identify a disallowed deduction, an arithmetic error, a missed deposit, or the like.

Description of the action the IRS proposes to take. It might be a minor action, such as an adjustment to your tax filings. It might be a more serious action, such as a payment request or an audit.

Identification of the date and method by which you may respond if you choose to dispute the notice.

All of this information is necessary if you choose to seek business tax help from a tax professional. If you do not understand the IRS letter or notice, you may need to consult an IRS tax attorney.

Collect Records

If you choose to dispute the letter or notice from the IRS, you should collect the records related to the issue identified in the letter or notice. As mentioned above, the letter or notice should be specific enough to determine which records and tax filings you need to collect. If you do not know which records you will need, you may want to seek business tax help from IRS tax lawyers.

In addition to any records documenting what happened, you may also want to contact your tax preparer, if you used one. He or she may have insight into the reasons the tax filing was prepared the way it was.

Call an IRS Tax Lawyer

Many small business owners prefer to handle matters themselves to save money. However, it may be advisable to seek business tax help regardless of the nature of the notice or letter from the IRS for a few reasons:

The payment may not be owed. Paying it without consulting a tax professional may mislead you into believing that you have to change the way you prepare future tax returns, thereby leading to many years of overpayment.

Disputing the IRS letter without representation might fail because of the arguments presented rather than the merits of the case. IRS tax lawyers have training and experience in providing business tax help and may be able to use the experience gained in prior tax cases to help you.

You want to avoid “jumping out of the frying pan and into the fire” by making a bad situation worse. Experienced IRS tax lawyers know which arguments not to make.

Take Care of It

Do not let the tax problem fester. While it is reasonable to take your time to find the right tax professional for business tax help, the sooner you take care of the problem, the sooner you can get back to running your business. Moreover, having an IRS tax lawyer contact the IRS as early as possible and working diligently to resolve the problem as quickly as possible could minimize any interest and penalties owed.

Letters and notices from the IRS can be scary, but approaching the problem in an organized manner and seeking professional help can get you through it.