With tax season now behind us, if you get a letter from the IRS, don’t hit the panic button. Yes, the IRS is a seemingly scary organization, and you’ve probably heard the horror stories about IRS audits. However, there are a number of very common reasons that you might get a letter from the IRS that is not a harbinger of doom and gloom.
First, most IRS letters are automated, and computer automation isn’t foolproof. Verify that the letter wasn’t sent in error. Check to see if the social security number and tax year matches your information.
Each letter the IRS sends addresses a very specific issue and includes instructions about any action you need to take. One of the most common reasons for an IRS letter is missing documentation. Perhaps you forgot to include a schedule or form when you submitted your return. Or you may get a notice that the IRS has made a change or correction to your return. Compare the change the IRS is noting to your original return. If you agree, you typically will need to pay the bill, but review the instructions included with the letter to determine if there are other steps required.
If you don’t agree with the change or correction, be certain to respond… in writing. Keep a copy of your letter and all documentation with your tax records. If Waddy Accounting Services completed your return, contact us, so we can help you rectify the issue. Whether you used Waddy or any other tax preparation service, always make certain your tax preparer receives a copy of any letter you receive regarding changes to your return. This is especially critical if the IRS notifies you that you owe additional tax and/or interest and penalties.
You may also get a letter from your state resulting from changes to your state return. Again, don’t panic. State tax payments are deductible at the federal level, so you may receive a letter from your state after federal updates occur. Additionally, if you move out of your former state, that state may contact you because they are expecting a return from you again. Be sure to update your address with all federal and state government agencies when you move.
What About an Audit?
The best part about working with Waddy as your tax preparation service is that you are working with an Enrolled Agent, and we can represent you before the IRS. Enrolled Agents are unrestricted regarding which taxpayers they can represent, what types of tax matters they can handle, and at which IRS offices they can represent their clients.
Whether or not you used Waddy for your tax preparation, if you receive a notification of an audit, contact us. Don’t go it alone!
IRS Letters Only!
Keep in mind that the IRS will always notify you in writing first, no matter what the situation is. Tax scams were rampant this year and are continuing with many taxpayers receiving scam phone calls supposedly from the IRS insisting they owe money and will be jailed or fined if they don’t pay immediately. If you receive such a call, hang up and report it to the U.S. Treasury Inspector General (www.tigta.gov).
You can read more about IRS Notices and Letters or Understanding Your IRS Notice. Or contact us. We’re here to help.
Still Need to File?
If you have not yet filed your tax return (or filed an extension request), it’s not too late. Yes, you will pay penalties and interest, but the longer you fail to file, the worse you are making the situation for yourself.
So if you still need to file, contact us. We work year-round and don’t close our doors after April 15th.
In fact, in addition to tax preparation, Waddy provides bookkeeping services, financial reporting, and payroll management as well.
Estate Planning: Everyone Needs It
Many people believe that estate planning is only for the very wealthy; however, if you have assets that include real estate, money in the bank, investments, retirement accounts and life insurance, you will benefit from estate planning.
You’ve worked hard to get where you are, so ensure that what you’ve worked for is distributed according to your wishes after you die. By taking time to plan now, that can happen.
Your estate includes:
- Cash (bank accounts)
- Investments (securities, stocks, bonds)
- Real estate (your home)
- Personal property
- Retirement plans and IRAs
- Life insurance death benefits
Estate planning benefits include:
- Asset preservation
- Reduction of taxes and unnecessary expenses
- Distribution of your assets to your heirs according to your wishes
- Ability to manage assets for yourself and your heirs in the case of incapacitation or disability
- Privacy protection
By proactively planning now, you can take steps that may favorably impact your tax and financial picture moving forward, and you can ensure that what you’ve worked so hard for will be distributed as you want
