Got an IRS Letter After Filing Taxes? Here’s What It Could Mean
As tax season goes on, many people are getting letters from the IRS. Why would you get such a letter after filing taxes?
After filing tax returns, people eagerly wait for a tax refund. However, they may end up getting a letter from the IRS instead. Why would you get such a letter from the IRS, and how should you handle it?
Receiving a notice or letter from IRS after filing taxes isn't usually a cause for concern. The IRS sends out millions of notices every year, and of over $150 million in federal tax returns filed each year, only 1 percent are audited. Most letters are just informing you of something, and some require a response.
Why did you receive a letter from the IRS?
The IRS website lists the following as reasons it sends letters after you've filed taxes:
- You have a balance due.
- You're due a larger or smaller refund.
- It has a question about your tax return.
- Your identity needs to be verified.
- It needs additional information.
- It changed your return.
- It needs to notify you of delays in processing your return.
How to respond to an IRS letter
You should read every IRS notice or letter, as it might contain valuable information or require a response by a specific date. It's important that you comply to minimize interest and penalty charges and preserve your right to appeal if you don’t agree with something. Make sure to keep a copy of all notices or letters with your tax records, as you may need these documents later.
The IRS recommends contacting them only if:
- You don’t agree with some information.
- It requested additional information.
- You have a balance due.
How to handle an IRS audit letter
Some factors that may prompt an IRS audit are as follows:
- Reporting taxable income incorrectly.
- Huge donations on a small budget.
- Home office deductions.
- 1099 income.
- International assets.
- Tax errors.
- A business losing money year after year.
- A lot of itemized deductions.
One of the easiest ways to avoid an IRS audit is double- and triple-checking your returns for errors or inaccuracies. Keep detailed records and receipts going back as far as six years. Even honest errors, such as stating the wrong income, filing under the incorrect status, or improperly claiming deductions and credits, could trigger an IRS audit.
If you're among the 1 percent of people who receive an IRS audit letter and you were honest in filing your return, there’s no need to panic. Seek professional help and ask for a review of your return.