How would you feel when you open your mailbox and find a collection letter from the IRS instead of the typical mix of bills and catalogs? For most people, receiving such a letter can feel like a never-ending nightmare that they cannot escape from.
Worse yet, that letter includes a call for payment, which is the last thing you want to deal with. So, now that you’ve gotten the letter from the IRS, what do you do? Deciding on your next steps is crucial as it could make all the difference in your situation.
What to Do If You Receive a Collection Letter from the IRS
Here are some essential steps we suggest you take:
Take a Deep Breathe
It’s natural to panic when you receive a notice from the IRS, but being terrified will not help you in any way. So, take a deep breath and try to calm your nerves.
Taking on the IRS requires clear thinking; the last thing you want to do is let your feelings control you. You need to be rational, so stop freaking out and carefully think through the steps below.
Read the Collection Letter Carefully
Not all IRS notices are bad news. Some are simple errors of mismatched paperwork or transposed numbers. Those minor issues should not take long to rectify, and you may not even have to pay any more fees.
Take the time to properly read the collection notice before taking further action. Find out precisely what is written in the letter and what the IRS recommends. Does the IRS assert that you underreported your income for the previous year? Are they claiming that you improperly claimed a deduction? Are they questioning your interpretation of a statute? Understanding the IRS’s claims can help you defend yourself, which will end up saving you time, money, and stress.
Pull Out Your Tax Return and Gather Supporting Documents
As indicated previously, some tax letters are only the results of minor disagreements or insignificant mathematical errors, while others are more serious. Now that you know what the IRS is saying, you will want to review the deductions and credits you claimed on your tax return.
You can start by obtaining a copy of the relevant tax return based on the collection letter received from the IRS. If you don’t have a copy, you can request one from the IRS. You can also hire a professional do it on your behalf.
Once you have your tax return in hand, you can check for discrepancies or mistakes by comparing it to the information provided in the collection letter. If you think the return is accurate, the next thing you need to do is gather all the documentation that supports it.
These supplementary records may include 1099 forms from your bank and brokerage accounts, W-2 forms from your employers, and any other documentation you had on your tax return. If you deducted expenses from your income, you would also need to compile that documentation on hand.
Do Not Ignore the Collection Notice
When it comes to dealing with the IRS, one thing is certain: wasted time equals wasted money. The interest and penalty clock starts running when the allegedly incorrect tax return is filed, and every minute you wait could cost you money.
If you wait too long, the IRS can take 90% of your net pay and empty your bank account without a court order. They can also take your home and other assets you own.
The most important thing to do is to act quickly, which means finding and examining relevant documents immediately. Once you have everything in order, you can proceed to the next, and possibly most crucial, stage.
Find a Suitable Professional to Deal with the IRS Collection Notice
You should never go up against the IRS on your own. You wouldn’t go to court without a lawyer and wouldn’t want to face the IRS without expert representation. Even if you’re good at taxes and finances, negotiating with the IRS isn’t a do-it-yourself thing. Even if you feel comfortable managing your finances and taxes, arguing with the IRS is not something you should do on your own.
Hiring a tax relief expert could save you a lot of money and a lot of stress and anxiety. Do yourself a favor and get expert assistance with your tax issue as soon as possible.
IRS issues can impact every aspect of your life. The worry of failing to file or pay your taxes may cause you to lose sleep. If you are seeking tax relief, we can assist you!
We offer a free, no-obligation consultation with one of our tax resolution experts to help ease the stress of your situation. You don’t have to worry about cost or privacy because the consultation is free and requires no commitments or gimmicks.