IRS Notices And Letters Every Taxpayer Should Know In 2024

A very important part of the U.S. tax system is the Internal Revenue Service (IRS). Its purpose is to make sure that both individuals and businesses follow tax laws and regulations. The process includes sending emails and notes to people about the taxes they need to pay. Taxpayers must understand these IRS notices and letters in order to respond properly and avoid possible fines.

Different kinds of information are sent by the IRS through notices and emails. People usually get notices or letters from the IRS for the following reasons:

• There's a balance due on your taxes. This is the most common reason for receiving an IRS notice. The notice will inform you of the amount owed, any penalties or interest that have accrued, and how to make a payment.
• The IRS has questions about your tax return. The IRS may send you a notice if they need more information to verify the accuracy of your tax return.
• The IRS proposes changes to your tax return. If the IRS believes there are errors or inconsistencies in your tax return, they may send you a notice proposing adjustments.
• You are due a refund. The IRS will usually send you a notice or direct deposit your refund if you overpaid on your taxes.
• You are being audited. If the IRS selects your tax return for an audit, you will receive a notice explaining the process and what information you need to provide.

There are different warnings and letters that the IRS sends out, but some are sent out more often than others. Here is a list of five important IRS letters and notes you should know:

What is a Lien? A federal tax lien gives the IRS legal claim to your assets, guaranteeing they get paid what you owe. This can make it difficult to obtain loans, sell property, or even renew your passport. 

What is a Levy? Think of a levy as the IRS actually taking your money or property to satisfy your tax debt. The IRS can levy your wages, bank accounts, or even seize and sell your car or house. There are different types of liens and levies, but the key takeaway is this: you want to avoid them at all costs.

There is good news, there are several ways to keep the IRS at bay:

• File your taxes on time and accurately. This is the single most important step to avoid unwanted attention from the IRS.
• Pay your taxes in full by the deadline. Even if you can't afford to pay everything upfront, consider setting up an installment plan with the IRS.
• Stay organized. Keep copies of your tax returns and other relevant documents for several years. This will make it easier to respond to IRS inquiries and avoid potential issues.
• Communicate with the IRS. If you receive a notice you don't understand, or if you're facing financial hardship that prevents you from paying your taxes, don't hesitate to contact the IRS directly. They are often willing to work with taxpayers who are proactive and honest.

Here's what you should do when you receive a notice of wage garnishment or bank levy. :

This means the IRS will take a portion of your paycheck to pay off your tax debt.

• Contact the IRS immediately: There may be a mistake, or you might qualify for an "innocent spouse" defense if you were married filing jointly and unaware of your spouse's tax issues.
• Negotiate a payment plan: Explain your financial situation and see if you can work out a more manageable installment plan.

This freezes the funds in your bank account.

• Contact the IRS again: Similar to wage garnishment, there could be an error or you might be able to negotiate a release of the levy if you can demonstrate your willingness to pay.
• Move exempt funds: If you receive government benefits directly deposited into your levied account, contact the Social Security Administration or other agency to make sure those funds are protected.

Receiving an IRS notice can be stressful, there's no need to panic. Here are some helpful tips to guide you through the process:

1. Read carefully and understand. The first step is to thoroughly read the notice or letter and understand why you've received it. The IRS uses clear and concise language, so don't hesitate to take your time and break down the key details.
   
2. Respond within the given timeframe. Most IRS notices and letters come with a deadline for response. Missing this deadline can result in complications and potentially worsen your situation. Act promptly and address the notice within the specified timeframe.
   
3. Seek professional help when needed. Tax laws and regulations can be complex, and navigating an IRS notice on your own might feel overwhelming. Don't be afraid to seek professional help from a tax advisor or CPA. A qualified professional can analyze the notice, explain your options, and guide you through the appropriate response.
   
4. Maintain records for future reference. Keep copies of all IRS notices and letters you receive, along with any related documents or correspondence. This will be helpful if you need to reference them in the future or if any questions arise down the line.
   
5. Preventative measures to avoid future notices. Understanding common reasons for receiving IRS notices can enable you to take preventative measures. Make sure you file your tax returns accurately and on time. If you anticipate owing taxes, make estimated tax payments throughout the year to avoid penalties. Consulting with a tax professional for guidance on proper tax filing and record-keeping can significantly reduce the chances of encountering IRS notices in the future.

To lower the likelihood of issues in the future, here are some things you can do now:

• Hire a qualified tax professional. A CPA like David J Griggs CPA can help you manage the complexities of tax filing, making sure your returns are accurate and filed on time.
• Stay informed. The IRS website offers a wealth of resources to help taxpayers understand their rights and responsibilities. Bookmark the IRS website (https://www.irs.gov/) and refer to it regularly for updates and guidance.
• Consider estimated tax payments. If you're self-employed or have income that isn't subject to withholding, you may be responsible for making estimated tax payments throughout the year to avoid penalties.
• Save for taxes. Taxes are part of life, so plan accordingly. Set aside a portion of your income each month to cover your tax liability.

If you're currently facing IRS letters, liens, or levies, don't panic. Here at David J Griggs CPA, we understand the complexities of tax law and can help you manage your situation with confidence. Contact us today for a consultation.