TurboTax / Tax Calculators & Tips / All Tax Guides / General Tax Tips / Handling Notices from the IRS

Handling Notices from the IRS

Updated for Tax Year 2015


OVERVIEW

Don't be alarmed if you've received a letter from the IRS. Not every letter means an audit. Most are routine and can be resolved in a few simple steps. Here's what to do if one shows up in your mailbox.


Each year, the IRS sends out millions of notices to taxpayers. Some are informational only; others require a response. They can be both favorable and unfavorable. On the plus side, they may advise you of your eligibility for a tax credit; on the minus side, of a pending audit.  

Notices may also alert you to an error on your tax return that triggered a refund (or a balance due). Others may request an updated address, or alert you to your eligibility for something such as the Additional Child Tax Credit. Still others will ask you to file an additional form.

In fact, there are at least 76 different form letters you can receive from the IRS on a number of topics. Check them out at www.irs.gov/Understanding Your IRS Notice.

What to Do if You Get a Letter From the IRS

Go ahead and open the envelope – the news may be in your favor. If it’s not, then here’s what you should do:

  • Deal with the letter promptly. If you miss the response deadline, it could make your case worse.
  • Stay calm. Panic won’t decrease your tax liability. In fact, if panic immobilizes you and you don’t deal with the letter, you may end up owing more.    
  • Deal only with the specific questions the letter asks. If you have another tax issue to discuss with the IRS, address it in a separate letter.
  • The letter will give you specific instructions on what to do to resolve the problem. Follow these directions carefully.
  • If you’re confused by the letter and not sure how to respond, the IRS can answer most questions by phone (1-800-829-1040). If the issue is serious, however, it might be better to put your questions in writing.
  • Some notices will ask for additional information. The IRS will provide you with a deadline for satisfying the request. To avoid further action, be sure to meet the deadline.
  • Other notices may advise you of corrections to your tax return. Compare the corrections to your original return.
    • If you agree with the changes, there’s no need to do anything, unless a payment is due.
    • If you don’t agree with the changes, write the IRS, explaining your position. Include any documents that support your case.
  • Mail the letter and any requested documents to the address the IRS provides – it’s usually in the upper left-hand corner of the notice. Include the bottom tear-off part of the notice that includes your name, address and Social Security number.
  • Keep a copy of any correspondence with the IRS. You may need to refer to it later.

Decreasing Your Risk of an IRS Audit

Once you’ve cleared up the problem, take steps to avoid receiving letters in the future. Many can be avoided by simply filing an accurate tax return. Careless mistakes will almost certainly trigger an IRS notice. Take special care with your return, check the math, review the rules, and sign on the bottom line.

The chance of being audited is low – only 1% of all returns are audited, according to 2009 IRS data. Yet some things on a tax return do increase your audit risk. Here are some red flags to watch out for:

  • Home business that loses money year after year. The IRS may view this as a hobby, not a legitimate business.
  • Home office deductions. If you claim a high percentage of your living space as a home office the IRS may be suspicious.
  • A high level of itemized deductions. Claiming $40,000 in deductions on an income of $60,000 will probably draw IRS attention.
  • Casualty losses out of synch with income. You can’t claim a casualty loss that’s less than 10 percent of your adjusted gross income net any insurance payments received.

Help from TurboTax

Our downloadable Audit Support Center is included free with all TurboTax products. It offers step-by-step guidance for dealing with all kinds of IRS letters. Find out why the IRS is contacting you and how to respond.

TurboTax also helps protect you by importing data such as W-2 and 1099 info directly from more than 100,000 employers, which reduces your chances of misentering information.  In addition, TurboTax checks your return for errors and common audit triggers, and guarantees your calculations will be 100% accurate.

For those who want even more protection, TurboTax also offers Audit Defense for full representation in the unlikely event you are audited (fees apply).
 
Additional information about IRS notices can be found in Publication 594, The IRS Collection Process. It’s available at www.irs.gov or by calling 1-800-TAX-FORM. 

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • Filing Deadline: IRS filing deadline for tax year 2015 is April 18, 2016 (except for residents of Massachusetts or Maine, where the IRS filing deadline for tax year 2015 is April 19, 2016).
  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected 3/18/16. Special discount offers may not be valid for mobile in-app purchases.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected 3/18/16. Prices subject to change without notice.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except the TurboTax Home & Business/QuickBooks Self-Employed bundle offers.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice service is available via phone for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2014 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.