Received an IRS Letter? A Tampa Accountant reviews the common ones!
Updated: Jul 19
Not all IRS Letters are created equal. Some are easy fixes & others are not. A Tampa Accountant talks about the 101’s of reading your IRS Notice!
So, you received an IRS Letter, now what? First things first, let’s understand what it’s about.
Like most people, you likely had a small heart attack when you saw an IRS Letter in your mailbox! Even more so after you opened it and saw a possible penalty listed, you’re trying to rack your brain on how this could happen. Well, don’t fear. Most IRS Letters are routine and common, taking only a templated response to resolve them. Let’s get into the basics of understanding your IRS Letter.
While there is a lot being said in each letter, the first 2 things to pay attention to are the TAX YEAR and the TAX FORM. This will help you narrow down what exactly the IRS is referring to in their letter. Example:
If your letter says TAX YEAR 2022, TAX FORM 1040, the IRS is talking about your 2022 1040 Personal Tax Return
If your letter says TAX PERIOD SEPTEMBER 30 2022, TAX FORM 941, the IRS is talking about your Q3 Payroll Taxes
If your letter says TAX YEAR 2022, TAX FORM 1120S, the IRS is talking about your 2022 S-Corporation Business Tax Return
Now while that might sound obvious, sometimes a letter can be overwhelming and we can miss the simplicity in it.
With 1040 returns, the most common types of letters reviewed by Tampa Accountants are related to:
Underreported Income (i.e. The IRS has a W2 or 1099 on file from an employer who submitted one under your SSN, but the 1040 your filed doesn’t reflect that income.) In this case, you will need to amend your return to match the IRS’ records.
Late payment penalties (This happens when you owe more than $1,000 after 04/15 and don’t pay in full. Interest and penalties get accrued on the balance. You can use your IRS Online Account to apply for a payment plan and roll that balance from that letter into a 72-month plan)
With 1120S/1065/1120 returns, the most common types of letters reviewed by Tampa Accountants are related to:
Late Filed Returns (this is the most common IRS Letter an Accountant deals with. It usually happens when you forget to file an extension by 03/15 and end up filing after 03/15. The penalty is on a per-shareholder basis so it’s always depicted rather large.) This type of letter can be resolved easier than most as all we have to do is write back to the IRS explaining why you filed late / give reasonable cause (i.e. you may have switched accountants and that lapse caused no extension to be filed, you may have had a big life moment which caused an inability to obtain accurate records, etc. There are a few cases for reasonable cause.) Nevertheless, every business gets 1 penalty abatement anyway, so there’s always wiggle room on these notices. However, it’s important to address them ASAP as they will be sent to a collection agency if you don’t.
With 941 returns and other tax types, it is highly recommended that you consult a Tampa Accountant before addressing further as those are the most complicated and may involve a small internal audit to see where the problem arose.
941 Taxes are payroll taxes (federal income tax, Social Security, and Medicare taxes). So when the IRS shows those as unpaid, those could be grounds for legal consequences and penalties. Depending on the amount of the behind tax, a tax attorney should be consulted.
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