Received an IRS Notice After Filing? Know Your Rights and Legal Options

Most people tend to dread April 15. Even if you have someone else prepare your income tax return, it seems like you hold your breath until you sign your return and submit it to the Internal Revenue Service (IRS). While it may feel good to finally seal the envelope containing your federal tax return (or for most people, submitting it online), filing your taxes is not the end of your tax obligations. If there are issues, it may be just the beginning.

Once the government receives your return, it will scrutinize it to see if you filed the correct forms, paid the correct amount of tax, and submitted payment of any balance due on underpaid taxes. If the government believes you underreported your income or failed to pay what you owe, your tax problems are just starting.

This article explains what to do after receiving an IRS notice after filing your taxes. We’ll also discuss why it’s a good idea to retain an experienced tax lawyer to help resolve issues with the IRS. If you’re facing a tax audit or have received a letter from the IRS stating that you owe considerably more than you thought, contact a tax professional right away.

Filing Your Taxes Is Just the Beginning

Once they file their taxes, most people don’t have to worry about them for another 365 days. This isn’t the case for everybody. For some, filing their taxes is just the beginning. For these taxpayers, the weeks and months after filing their taxes are the most critical part of the tax process.

Depending on your situation, a variety of things can happen after you file your taxes, including:

• Receiving a notice from the IRS indicating that you owe additional taxes
• Receiving an IRS notice that you underreported your income
• An IRS letter stating that they did not receive all the information they needed to complete your tax review

Some IRS notices are about something you can easily rectify. For example, if the government requests receipts for charitable donations you claimed on your tax return, you can submit that additional information and resolve the problem.

IRS notices can also reflect a much more serious problem. It’s in these cases that you should reach out to an experienced tax attorney. They know the tax laws and have experience negotiating with the IRS on complex tax issues.

The Notice Arrives: Understanding Common IRS Letters

If you’ve ever received an official IRS letter, you know how scary it can be. Even when the issue is something you can easily resolve, it’s intimidating to get an IRS notice. One thing that can make it a bit easier to deal with is understanding what the notice is about.

Some of the more common IRS letters include:

• CP 2000 Notice: This letter informs the taxpayer that the IRS has information that does not match the information on the individual’s return. For instance, the government may have received a 1099 from a company the taxpayer did freelance work for, but failed to include on their tax return.
• Math Error Notice: This notice informs the taxpayer that a clerical error or miscalculation on their tax return has resulted in a tax adjustment. Some of the most common types of errors include math mistakes, inconsistencies, or claims that exceed the legal limit. You have 60 days to respond to the notice by requesting a reversal of the adjustment or an abatement.
• Notice of Deficiency (90-day letter): This letter serves as a formal legal notice that the individual owes more taxes than they estimated. The letter offers the person 90 days to petition the U.S. Tax Court to appeal the additional taxes owed.

If you receive any of these notices from the IRS, it’s best to consult a tax attorney for help. They can explain what the letter means and negotiate with the IRS on your behalf.

The Audit: From Mail Inquiry to Field Examination

The only thing more frightening than receiving an IRS notice is learning that the government has decided to audit you. This is true for both individual taxpayers and people who owe business taxes. The best way to prepare for an audit is to gather all of your tax records and meet with a tax pro or CPA.

There are different types of IRS tax audits, including:

• Correspondence audit: This is the least serious type of IRS audit, but it’s still not something to be ignored. This audit involves the IRS requesting additional information to verify the accuracy or details of your tax return. For example, if you claimed a child tax credit, the government may want to see proof that you have actually paid for childcare.
• Office audit: This type of audit can be intimidating because it takes place at a local IRS office. It involves an in-person interview with an auditor, where they will ask questions about your standard deductions, credits, income, etc.
• Field audit: This is the most serious type of audit. It involves an IRS agent scheduling an appointment to visit your home or place of business. The IRS will send you a letter in advance, informing you of the audit date and the specific tax information and documents you’ll need to provide.
• Random audit: Most people will go their entire lives without being audited. There’s always a chance they’ll be one of the taxpayers the IRS randomly chooses for an audit of their federal tax return.

Regardless of the type of audit, you should meet with a tax expert as soon as you receive the notice of audit. In most cases, the IRS only conducts an audit because it has found something suspicious with your tax filing. You’ll want someone by your side who has been through the audit process before to help advise you and protect your rights.

The Statute of Limitations: How Long Are You at Risk?

The IRS generally has ten years from the date of assessment to collect tax debt. This is known as the Collection Statute Expiration Date (CSED). However, certain actions can extend or suspend this period.

There are other statutes of limitation that apply to specific situations, such as:

• The 3-Year Rule: Taxpayers can only claim tax refunds or file an amended return for three years after the filing date. If you wait longer than three years to request a refund, the IRS will deny your request. You’ll lose your right to claim a refund for these years.
• The 6-Year Rule: The government can normally go back only three years (a look-back period) when conducting an audit. However, the period extends to six years if you underreport your income by more than 25% in any one tax year.
• The Forever Rule: There is no statute of limitations period for taxpayers who fail to file their taxes, fail to pay outstanding tax bills, or submit a fraudulent tax return. The IRS can come after you at any point for one of these offenses.

The clock starts ticking on the day you file your taxes. Once the statute of limitations period expires, no further action can be taken on that specific tax year.

Amending a Return (Form 1040-X): Correcting a Mistake

Nobody’s perfect, and there are times when you (or the person you hire for tax preparation) make a mistake on your tax return. If this happens, your tax return can be amended by filing Form 1040-X.

You should only amend your tax return if you need to correct or change the following:

• Tax liability
• Refund
• Credits (such as the Earned Income Tax Credit – EITC)

In most cases, you can e-file your Form 1040-X, along with any supporting documents. If you originally filed a paper return, you may have to file your amendment in paper as well.

Once the IRS has a chance to review your amended return, it will issue a direct deposit to your bank account if you’re entitled to a larger refund. If you owe additional taxes, you must pay the full amount or request a payment plan.

You can file multiple amendments for the same tax year if needed, though each new amendment supersedes any previous for that year. It normally takes from six to 18 weeks for the government to process your request.

Be wary of scams that promise to amend your taxes and get you a bigger refund. Leave your tax planning to a tax professional or skilled tax attorney that you trust. You or your authorized tax representative should communicate directly with the IRS about legitimate tax issues, not through third-party companies promising unrealistic results.

A Tax Attorney Can Help You Resolve Your Tax Issues

If you’re dealing with tax issues, such as an audit, consider contacting a local tax attorney. Dealing with the IRS can be frustrating and intimidating. A tax lawyer not only understands the tax laws, but also has experience dealing with the IRS.

Learning that you owe delinquent taxes or didn’t pay your taxes by the due date can be frightening. The Internal Revenue Service is one of the most powerful government agencies in the United States. You’ll want a seasoned tax attorney by your side to offer helpful tax tips and help you avoid paying unnecessary taxes, penalties, and interest.