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What Should You Do if Your Client Gets a Notice From the IRS?

What to do if you receive a notice from the IRS

If your client gets a letter from the IRS, there’s no need to worry. Most IRS notices are simple to understand and quick to address. For example, the IRS recently sent out a flurry of notices informing taxpayers of a calculation error they discovered when issuing checks for recovery rebates. These notices are easy to resolve (most taxpayers are asked to provide additional information or documentation), but it got us thinking: now might be a good time to revisit IRS notices. Let’s talk about how you can handle them, how to talk to your clients about them, and what the most common notices are.

Why Does the IRS Send Out Letters and Notices?

While there are many different reasons the IRS will send out a notice or letter, most are quite simple. For example, the simpler notices will:

  • Correct a math error on the return
  • Notify the taxpayers about a duplicate or missing payment
  • Request missing information

However, some notices indicate a more serious problem. Some will demand payment from an overdue tax bill, notify your client their refund is being withheld due to a discrepancy, or — for the unlucky few — warn your client of an impending audit.

Whether the problem is simple or complex, there are a few best practices you can employ to ensure you address the notices in a manner that will remedy the problem quickly.

What Should Your Clients Do if They Get an IRS Notice?

The IRS will send notices directly to your client’s business address. Even if your client granted you power of attorney, the IRS will only send notifications to the address they have on file. Make sure your client informs you about any and all notices they receive, no matter how minor they appear to be. Not only are you better equipped to interpret the IRS’s request, but helping your client respond to IRS letters is a great way to build trust and improve the client/practitioner relationship.

Once you have the notice in front of you, there are a few things you (and your client) should do.

Read the notice carefully

IRS notices are often short, but if you look carefully, the notice will list everything you need to do, including how and when to respond. To interpret the letter, you may need to compare the IRS’s information with your client’s filed return, so make sure you have a copy of that return handy.

Take note of the deadline to respond

The IRS does not give taxpayers lengthy response deadlines. Many of your clients will be required to respond within only 30 days of the date of the notice. If they don’t respond by the deadline, they will be abdicating their right to appeal.

Respond in writing

Not all notices require a response, but if you are required to reply to the notice, do so in writing; the IRS won’t be able to make changes over the phone. The IRS usually says that they will respond to your formal, written response within 30 days.

Provide as much information as possible

The more information you provide, the quicker the IRS can determine a resolution. Include all the following in your response:

  • Your client’s name and identifying information (yes, that includes their social security number)
  • Your name and identifying information
  • Your authorization number that grants you permission to talk to the IRS on your client’s behalf (read more about this in the “power of attorney” section below)
  • The tax year and tax form in question
  • A reference to (and a copy of) the IRS notice
  • Copies of relevant tax returns and supporting documentation
  • Clear, concise explanation of your stance
  • A signature by you or your client

IRS workers and examiners are overworked, especially right now. A little bit of kindness goes a long way.

Make copies of everything

If your client needs to send information into the IRS — like cancelled checks, a certified mail receipt or a missing tax document — do not send in the originals. Send the IRS copies of all important documents.

Similarly, you’ll want to make copies of the IRS notice or letter. When you respond to the notice, include a copy of it in your response to expedite the process.

Take good notes for next year

If the IRS adjusts your client’s tax return, make note of that adjustment in your files. You will almost certainly forget the details of that notice a year from now. For example, if your client’s overpayment was reduced, you should do two things: (1) add a copy of the notice to your client’s carry forward documents, and (2) make a note on the copy of their return to help jog your memory.

Consider a power of attorney

If the IRS has more than just a small issue with your client’s tax return, it will be worth your time to get a power of attorney (POA). Use Form 2848 to apply. If the IRS approves the POA application, they will assign you a CAF (Centralized Authorization File) number. When you contact the IRS on your client’s behalf, always include your CAF number in the correspondence.

Common IRS Notices

So, what types of notices should your clients be aware of? Below is a table outlining common notices, what they mean and what actions your clients should take if they receive a notice, if any.

Letter or NoticeReason for Letter or NoticeAction to Take
Letter 6419Summarize the total amount of advance child tax credit payments received in 2021.
Use this letter to help you reconcile your client’s child tax credit on their 2021 tax return.

CP2000Notice of adjustments to income or payments reported on the return.
If you agree with the proposed changes, have your clients sign the form and return it to the IRS with payment owed (if any). If you disagree, follow the IRS’s instructions to appeal.

Letter 12CMore information is needed to process an individual income tax return.
Respond by providing the information requested or with a letter that explains why you disagree with the IRS’s conclusion.

Request for supporting documentation to verify certain aspects of the return, including the Earned Income Tax Credit (EITC), the American Opportunity Tax Credit (AOTC), filing status and dependency exemptions.

Respond to the letter by providing copies of the requested information.
CP14Notice of balance due on unpaid taxes.
If you agree with the notice, have your client make a payment by the due date stated in the notice. If you disagree, contact the IRS by the response deadline.

Discrepancy between information that has been reported to the IRS and the information in the filed tax return.

Sign the response form included in the notice. If you disagree, provide documentation to support your stance.

Letter 2205Notice of an audit or examination.
Inform your client what an IRS audit could entail. Submit a power of attorney if you don’t have one already, and organize your client’s tax documents to make the examination process go smoothly.

Next Steps

As you help your clients address IRS letters they receive, warn them of potential scams. It’s common for IRS impersonators to email or call requesting sensitive information. The IRS will always contact taxpayers via letters in the mail. The only time the IRS will call your client is if they have already informed them they would be calling (like during an examination or audit).

And as always, be thinking about how changes (and potential changes) could impact your client’s tax plans. If your client receives an IRS notice around the time you’re preparing their tax return, it might make sense for you to extend their return and wait to file until the issue is resolved. You can always call and ask the IRS agent what the best path forward is if you have any questions.

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