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What to Do When an IRS Letter Arrives in the Mail
IRS Tax Tip 2017-49, April 18, 2017
The IRS mails millions of pieces of correspondence every year to taxpayers for a variety of reasons.
Below are some suggestions on how to best handle a letter or notice from the IRS:
1. Do not panic. Simply responding will take care of most IRS letters and notices.
2. Most IRS notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and provides specific instructions on what to do. Careful reading is essential.
3. A notice may likely be about changes to a taxpayers’ account, taxes owed or a payment request. Sometimes a notice may ask for more information about a specific issue or item on a tax return.
4. If a notice indicates a changed or corrected tax return, review the information and compare it with your original return.
5. There is usually no need to reply to a notice unless specifically instructed to do so, or to make a payment.
6. Taxpayers must respond to a notice they do not agree with. Mail a letter explaining why there is a disagreement with the IRS. The address to mail the letter is on the contact stub at the bottom of the notice. Include information and documents for the IRS to consider and allow at least 30 days for a response.
7. There is no need to call the IRS or make an appointment at a taxpayer assistance center for most notices. If a call seems necessary, use the phone number in the upper right-hand corner of the notice. Be sure to have a copy of the tax return and notice when calling.
8. Always keep copies of any notices received with tax records.
9. Be alert for tax scams. The IRS sends letters and notices by mail. IRS does not contact people by email or social media to ask for personal or financial information. The IRS will not demand payment a certain way, such as prepaid debit or credit card. Taxpayers have several payment options for taxes owed.
For more on this topic, visit IRS.gov. Click on the link ‘Respond to a Notice’ at the bottom center of the home page. Also, see Publication 594, The IRS Collection Process. Get IRS.gov/forms at any time.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
IRS Provides Tips on Determining If It’s Really The IRS At Your Door
WASHINGTON — The Internal Revenue Service has created a special new page on IRS.gov to help taxpayers determine if a person visiting their home or place of business claiming to be from the IRS is legitimate or an imposter.
With continuing phone scams and in-person scams taking place across the country, the IRS reminds taxpayers that IRS employees do make official, sometimes unannounced, visits to taxpayers as part of their routine casework. Taxpayers should keep in mind the reasons these visits occur and understand how to verify if it is the IRS knocking at their door.
Visits typically fall into three categories:
IRS revenue officers will sometimes make unannounced visits to a taxpayer’s home or place of business to discuss taxes owed or tax returns due. Revenue officers are IRS civil enforcement employees whose role involves education, investigation, and when necessary, appropriate enforcement.
IRS revenue agents will sometimes visit a taxpayer who is being audited. That taxpayer would have first been notified by mail about the audit and set an agreed-upon appointment time with the revenue agent. Also, after mailing an initial appointment letter to a taxpayer, an auditor may call to confirm and discuss items pertaining to the scheduled audit appointment.
IRS criminal investigators may visit a taxpayer’s home or place of business unannounced while conducting an investigation. However, these are federal law enforcement agents, and they will not demand any sort of payment. Criminal investigators also carry law enforcement credentials, including a badge.
The IRS reminds people who owe taxes – or think they do – to stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more information, visit “Tax Scams and Consumer Alerts” on IRS.gov.
Taxpayers have a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore these rights and the agency’s obligations to protect them on IRS.gov.
How Long Should I Keep Income Tax Records?
Know what to hold on to after your form is sent in.
Written by Richard R. Hammar
You must keep records so that you can prepare a complete and accurate income tax return. The law does not require any special form of records. However, you should keep all receipts, canceled checks, and other evidence to prove amounts you claim as deductions, exclusions, or credits. Records should be retained for as long as they are important for any income tax law.
In general, you should keep records that support an item of income or a deduction appearing on a return until the statute of limitations (the period during which the IRS can audit your return) runs out. Usually this is three years after the date a return was filed (or three years after the due date of the return, if later). However, in some cases it is wise to keep records for a longer period of time, since a six-year limitations period applies in some situations, and in others (e.g., no return was filed or a return was fraudulent) there is no time limitation on the authority of the IRS to begin an audit.
For how many years can the IRS question or audit your income tax returns? Consider the following three possibilities:
• Three years. In general, the IRS may audit your returns to assess any additional taxes within three years after the date a return is filed (or within three years after the due date of the return, if later).
EXAMPLE. Pastor W filed his 2012 tax return on April 10, 2013. The IRS ordinarily may audit Pastor W’s 2012 return only if it does so by April 15, 2016.
• Six years. The three-year period during which the IRS may audit your returns is expanded to six years if you omit from gross income an amount greater than 25 percent of the amount reported on your return.
• No limit. The IRS can audit returns without any time limitation in any of the following situations: (1) a false or fraudulent return is filed with the intent to evade tax; (2) a taxpayer engages in a willful attempt in any manner to defeat or evade tax; or (3) a taxpayer fails to file a tax return. IRC 6501(c).
KEY POINT. Whenever a taxpayer is requested by the IRS to extend the statute of limitations on an assessment of tax, the IRS must notify the taxpayer of the taxpayer’s right to refuse to extend the statute of limitations or to limit the extension to particular issues.
Section 6502(a)(1) of the tax code specifies that “where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected . . . within 10 years after the assessment of the tax.”
Adapted from the Church & Clergy Tax Guide by Richard Hammar.
Specific recordkeeping requirements with respect to the following exclusions and deductions are discussed in the Church & Clergy Tax Guide:
• Housing allowances (Chapter 6)
• Business expenses (Chapter 7)
• Charitable contributions (Chapter 8)
Records of transactions affecting the basis (cost) of some assets should be retained until after the expiration of the limitations period for the tax year in which the asset is sold.
Churches have recordkeeping requirements too. These requirements are addressed in Chapter 11.
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