Tax

What to do with a notice

The Wandering Tax Pro had some excellent advice on what to do with a notice from the IRS or state agency of your choice.  

Basically, the advice is don’t ignore the notice, but don’t assume it is correct either. If you use a preparer, give the notice to the preparer immediately. If you don’t follow these steps:

1. Make sure the notice has the correct information on it by checking it back to your return.
2. Because they usually don’t, set aside an hour to call the Department of Revenue (or IRS or whatever). Between waiting on hold and getting your account straightened out you’ll probably need the whole hour (two if calling Louisiana). Go to the website and find a direct number to the Department rather than the 800 number on the notice. You’re less likely to get caught at a call center this way.
3. Keep a detailed account of who you spoke with and the number you called. Take as detailed notes as possible on the phone so that you can reconstruct the whole conversation later.
4. You have a 90% chance of them telling you to write a letter. Ask them for a direct contact or a fax number at the very least. E-mail is generally best. Writing a letter gets you directly into the third circle of bureaucratic Hell because no one has to take responsibility.
5. Write/fax/send your letter. Keep a copy of everything you sent them.
6. Follow up in a month or so. Don’t assume everything is okay if you don’t hear back from them. Most states do not send followup correspondence until you get the collection notice. Start with the person you spoke with, unless it is a call center. Then you will never get the same person.
7. Keep following up until you get it resolved.

Most people at the state will try to help you. A lot of times they simply can’t. A couple of more tips that you need to know:

1. If you are being assessed interest and penalties, know that penalties can (and will) be waived about 75% of the time. Most penalty statutes have a ‘good faith’ exception and if you can prove you tried to follow the law, they will almost always waive the penalties. Interest is almost never waivable.
2. Very few states require payment first and appeal later. Some notices will seem to tell you that you need to pay up front. Call the state and ask the person you speak with if you really need to pay. If you pay up front interest and penalties will almost never be repaid, so do everything that you can to avoid paying up front.
3. If you think you are right, keep fighting. Get a professional involved if you need to.

Hopefully, you will never see a notice, but if you do keep these steps in mind.

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© 2006 Kirk Walsh.