The Dreaded Letter From the IRS

A letter from the IRS used to send each of us into fits of anxiety. Now we get them all the time, since the IRS likes to send us forms every other day. That being said, there is still one particular letter you do not want to receive from the agency.

Thick letters from the IRS are pretty much the norm. This is particularly true if you own a business. The thick letters are full of forms. Ah, but what about a thin letter from the agency? This is typically nothing but bad news.

The dreaded thin letter from the IRS promises misery in all its simplicity. It is usually a one page statement, but packs the punch of a tank. Why? The IRS notice is issued under only one circumstance. The agency has found something wrong with your taxes.

Importantly, this one page letter is not always the precursor to doom. In very rare circumstances, it can contain good news. I once received one. After recovering from an anxiety attack, I actually read the letter and learned I was due just under twenty bucks.

The bad news is you are probably being audited if you receive this letter. Go ahead, cry. Let it out. Once you are done, actually read the full letter. The audit may not be the torturous event you are imagining. In fact, it rarely is.

A vast majority of the time, the notice will be for what is known as a correspondence audit. This means the IRS is contesting something about your taxes, but is willing to give you the opportunity to deal with it by mail. That means no grilling by an agent.

With a correspondence audit, the nature of the dispute will be identified in the letter. The agency will often indicate it doesn’t buy one of your deductions. It will also suggest a revised amount due on your taxes. In short, the problem and solution is provided.

Once you receive the letter, the burden is on you. You are usually allowed to do nothing if you agree with the proposal of the agency. If you want to fight it, you have 30 days to send a letter saying as much and why.

If you agree with the proposed changes, the correspondence audit is resolved and you are done with it. If you disagree, you may turn a molehill into a mountain. It may be wise to hire a tax attorney to help you with the coming brawl.

If you receive the dreaded thin letter from the Internal Revenue Service, don’t panic until you actually read it from beginning to end. It may be easy to resolve. If it looks ugly, get professional help or risk the IRS rolling over you like a bug.

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