Letters from the IRS

So you received a letter from the IRS, maybe even certified. Do NOT have a heart attack or loose sleep over this letter. Review the information, know where you stand, and respond with a sound plan to resolve the issue.  There are a series of letters that the IRS (Internal Revenue Service) will send to you before an actual person is assigned to meet with you.  One of these is a letter called the CP2000. (I will be discussing other letters in future posts).

What this letter means is that when you filed your original return you forgot to report some income and they have sent you this notice telling you what you forgot and what you now owe (called a summary of proposed changes not an actual assessment) when they added this income to your return.

For example: on a recent notice the IRS told my client he owed an additional $48,000 in tax because of this additional income (in this case income from stock sales that had been inherited). What the IRS failed to take into account was the basis for the stock that was sold, and eventually resulted in a loss for this client and a refund once the return was corrected.

Just because the IRS sends you a letter does not always mean you have an additional liability.  They are a large business, and are accurate most of the time, but it is your responsibility to be sure what they are stating is accurate.  Review their correspondence, know where you stand, and if in doubt consult a tax professional before agreeing to these additional tax increases. Know your rights and treat the IRS in a professional manner and they will be more than willing to explain items to you or your representative.