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Don’t panic! What to do when clients get a letter from the IRS

Financial advisors may not be tax experts but that doesn’t stop concerned clients from reaching out for answers. Dealing with the IRS or any tax related issue can be a frightening prospect. And when contacted by the IRS clients know they aren’t in for an easy time.

Generally people are aware that any phone call purporting to be from the IRS is, in all likelihood, actually a scam. However, the same cannot be said for any letter a taxpayer may receive.

The IRS sends out millions of letters every year (many of them automated) and most of them don’t need to be the subject of fear. In fact, to help ease taxpayers’ minds on the subject, the service put together a list of do’s and don’ts to help relieve some of the fear and uncertainty.

Scroll through to learn what clients need to know when it comes to dealing with legitimate communication from the IRS.

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While we’re all hopefully aware that any phone call purporting to be from the IRS is, in all likelihood, actually a scam, the same cannot be said for any letter a taxpayer may receive.

The IRS sends out millions of letters every year (many of them automated) and most of them don’t need to be the subject of fear. In fact, to help ease taxpayers’ minds on the subject, the service put together the following list of do’s and don’ts to help relieve some of the fear and uncertainty.
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Don’t ignore it
Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do.
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Don’t panic
The IRS and its authorized private collection agencies do send letters by mail. Most of the time all the taxpayer needs to do is read the letter carefully and take the appropriate action.
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Do act on the letter in a timely way
A notice may reference changes to a taxpayer’s account, taxes owed, a payment request or a specific issue on a tax return. Taking action in a timely fashion could minimize additional interest and penalty charges.
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Do review the information
If a letter is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records — and communicate with their tax preparer, if appropriate.
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Don’t reply unless instructed to do so
There is usually no need for a taxpayer to reply to a notice unless they are specifically instructed to do so. On the other hand, taxpayers who owe should reply with a payment. Information about payment options is available on IRS.gov.
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Do respond to a disputed notice
If a taxpayer does not agree with the IRS, they or their tax professional should mail a letter explaining why they dispute the notice. They should mail it to the address on the contact stub at the bottom of the notice. The response should include information and documents for the IRS to review when considering the dispute. The taxpayer or their tax professional should allow at least 30 days for the IRS to respond.
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Do remember that there is usually no need to call the IRS
If a taxpayer must contact the IRS by phone, they should use the number in the upper right-hand corner of the notice. The taxpayer or their tax professional should have a copy of the tax return and letter when calling. (For those worried about scams, note that the IRS does conduct some business by phone, but they never initiate contact by phone — see the next item.)
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Do avoid scams
The IRS will never initiate contact using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure if they owe money to the IRS can view their tax account information on IRS.gov.