Decoding IRS Notices: Understanding their Purpose and Intent
Receiving a letter from the IRS can elicit some anxiety amongst recipients – though they become less intimidating once you grasp the necessary responses. Reading notices thoroughly and systematically will help you understand why you received an IRS notice and gauge its purpose and intent. Notices include straightforward information and often don’t require responses.
In this blog, we will guide you through the task of reading an IRS notice, demonstrating the systematic approach to determining effectively. We will also offer insight into how NOTICENINJA, our comprehensive tax management platform, can simplify the process by automating the organization process, helping you understand the type of notice and response required.
Review the Notice Carefully
Upon receiving an IRS notice, read the notice carefully and in its entirety. Quickly determine the notice number, type, date, and any specific reference numbers or codes. Tracking this information benefits your record-keeping and helps prevent missing deadlines.
Determine which Issue the Notice Addresses
Determining the specific issue or concern of the IRS notice specifies whether the IRS is requesting an action or not. The IRS sends notices and letters for the following reasons:
- The IRS has found a balance due
- The company is due a larger or smaller refund
- A discrepancy was found in your reported income, deductions, or credits
- They have a question regarding your tax return
- To request identity verification
- They need additional information
- They changed your return
- Notification of delays in processing your tax return
Look for Instructions and Deadlines
The IRS seeks to resolve issues quickly and will provide instructions on how to respond and when to respond by. Carefully read the instructions and note the deadline to ensure timely action. Missing a deadline can lead to further complications and avoidable penalties.
Compile Relevant Supporting Documents
Keep records of all tax documents, regardless of how small they are, as a precaution for future correspondence. Upon receiving a notice, you’ll be able to quickly gather all relevant supporting documents.
Common documents the IRS requests include the following:
- Tax returns
- Financial statements
- Any other records mentioned in the notice
These documents will help you understand the IRS's position and provide crucial evidence to support your response.
Contact a Tax Professional if Necessary
If the notice is complex, involves significant financial implications, or you don't understand the context, consider consulting a tax professional such as an accountant or tax attorney. They will provide expertise and guidance to help you interpret the notice accurately, helping you manage the volume of your tax notices.
Maintain Copies and Proof of Response
Before submitting your documents and response, make copies of all correspondence, including your response letter, supporting documents, and proof of delivery. These documents will be useful if the IRS requires further explanation or sends a follow up indicating a response was not received.
Quickly Understand Notice Purpose with NOTICENINJA
Interpreting IRS notices can be complex, especially if you've received multiple notices. Thoroughly reading a single notice can be especially challenging when companies have hundreds or thousands of notices to sort through.
That's why we've created NOTICENINJA – an automated tax software to help businesses stay organized, understand how to respond, and ensure compliance with the IRS.
Learn more about how NOTICENINJA can help your business organize and maintain compliance.