It’s my annual Taxes from A to Z series! This time, it’s Tax Cuts and Jobs Act (TCJA) style. If you’re wondering whether you can claim home office expenses or whether to deduct a capital loss under the new law, you won’t want to miss a single letter.
N is for Notice.
When the Internal Revenue Service (IRS) needs more information from you or needs to communicate an action that they intend to take (like a lien or levy), you won’t receive a call or an email. You’ll receive a notice. The notice will explain why the IRS is contacting you and tell you what you need to do next.
The IRS may send a notice if they have a question about your tax return or if they need additional information from you. For example, if there is a Social Security number on your return that doesn’t match the IRS’ records, or if there is a mismatch between what you’ve reported on your tax return and what your employer or payer reported, the IRS will advise you about the problem and request more information. The IRS will also send a notice if you owe money, or if you are owed money in the form of a refund (that is different than expected). You’ll also receive a notice if the IRS changes your return—typically with an adjustment—or if there will be a delay in processing your return or your request.
When you receive the notice, read it carefully. If there is a change in your tax due, compare the information in the notice with the information in your original return. In most cases, if you receive a notice and you agree with the change or adjustment, you don’t need to take any more steps. However, you should respond if you disagree with the notice or if the notice requires a response by a specific date.
A code indicating the type of notice will be at the top. This example is a CP2000, which is the kind of notice the IRS sends when the income or payment information on file doesn’t match the information you reported on your tax return. If you not sure why you’re receiving the notice, you can plug the type of notice into the search feature on IRS.gov for more information.
Directly under the type of notice is the tax year that the IRS is contacting you about. This will not necessarily be the most recent tax year. Pay attention to the tax year because, among other things, it may be impacted by the statute of limitations.
You’ll find the IRS contact information under your identifying information (that’s typically your Social Security number). If you have questions about the notice, you can use this number to contact the IRS. Be sure to have a copy of the notice handy when you call; it’s a good idea to have a copy of your tax return for the applicable tax year, too.
The body of the notice explains why the IRS is contacting you, along with any proposed changes. In this example, the IRS is changing the amount due on the tax return. The notice explains the change, together with any interest or penalty and the amount due. There may also be a deadline for payment (as in the example).
If you owe more tax, and you agree with the changes, you should pay as much as you can, even if you can’t pay the full amount you owe. Penalty and interest may apply and will continue to accrue until you pay in full.
If you disagree with the changes, your next steps will be outlined in the notice. Pay attention to any deadlines for filing an appeal or otherwise protesting the changes.
The IRS will also explain what will happen if you don’t respond by the deadline.
If you need help understanding your notice, or what your options might be, you’ll want to reach out to someone. Help may be available through the IRS taxpayer assistance center, or check with your tax professional.
For more Taxes From A To ZTM 2019, check out the rest of the series:
- A is for Alimony
- B is for Bracket Creep
- C is for Credit For The Elderly Or The Disabled
- D is for Due Dates
- E is for Earned Income Tax Credit (EITC)
- F is for Fair Debt Collection Practices Act (FDCPA)
- G is for Gross Estate
- H is for Home Office Deduction
- I is for Innocent Spouse
- J is for Jackpot
- K is for Kiddie Tax
- L is for Long-Term Capital Gains or Losses
- M is for Medical Expenses