The IRS sent me a letter and says I owe money, what now?

The IRS is wrapping up its post-pandemic process and has begun sending out notices. And this is just the beginning. Right now we are seeing the IRS sending out notices related to the 2020 tax year to taxpayers from late 2022 to early 2023.

Remember that the IRS will never make a phone call to you, if you get such a call, it is spam. But the IRS will definitely send you notices, and they are!

What to do when you get a notice from the IRS? Here are some tips to help you take the right steps:

1. Open it immediately

Don’t put the notice from the IRS aside and let it go unnoticed. Open it immediately.

This notice could simply be about a change in address, a refund coming your way… or it could be that the IRS system is saying for some reason you owe money, you didn’t report income, you claimed a credit incorrectly… or it could be that scary notice that you’ve been selected for audit or review.

2. Notify your tax preparer

If the notice just provides information, like a tax refund coming or a change of address notice, just keep it for your records.

If the notice says you owe something or there is a discrepancy, notify your tax preparer as soon as possible. Upload the notice to their client portal or drop by their office.

In most cases, your preparer can open a tax resolution case and help you figure out where the problem is.

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3. If you don’t have a tax preparer, now is the time to find an EA (Enrolled Agent) or CPA (Certified Public Accountant)

Don’t try to represent yourself to the IRS.

Would you rather represent yourself in court than have an attorney?

The IRS can easily recognize when someone is representing themselves. If you don’t already have a tax preparer, hire an EA or CPA.

4. File your current taxes on time

If you have an issue with your previous year’s tax return and it’s open, it’s vital that you file and pay your current taxes on time.

In fact, whatever old tax bills or inconsistencies your EA or CPA will help you resolve will only start working once you’ve updated your current tax return.

5. If you owe money, you owe it

The IRS rarely forgives a debt. If you owe money, they will get their money one way or another.

The IRS will not negotiate unless your EA or CPA can prove that you cannot and will never pay.

Most IRS cases end in an installment plan.

If something went wrong, your CPA or EA can help resolve it. But not paying taxes and not setting up a payment plan will never go away. Instead, it will grow and your tax amount will grow even bigger.

6. Don’t waste time, you will lose money

To reiterate, don’t try to avoid an IRS notice and think it will disappear.

The notice always has a small window in which you can respond before it grows even bigger. It is extremely important that you involve your EA or CPA immediately.

Penalties and interest charged by the IRS are something you do not want to pay on top of taxes!

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FAQs

Q.How do I pay?

A.You can pay online, by phone, or by mail. If you can’t pay in full, ask about a payment plan.

Q.What if I disagree with the amount owed?

A.Contact the IRS directly or speak with a tax professional to dispute the claim.

Q.Can I ignore the letter?

A.No, ignoring the letter will only make things worse. Act quickly to avoid penalties.