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What to do if you got a Nastygram from the IRS

For just about everyone, one of the scariest pieces of mail you can ever receive has something that looks like this in the top left corner:

Even for those of us who deal with the IRS all the time, the visual of this seal on an envelope still triggers a rush of adrenaline.

Personally, I feel that they should be required to also stamp the outside with "THIS IS NOT SCARY" if it's something mundane like a confirmation of an address change (like this one was). Unfortunately, they do not.

So, what should you do if you see this dreaded sender in the return address window of a piece of mail you've just received? Here's some best practices.

1. Take a deep breath (or a few, whenever possible). Hyperventilation is a serious matter and is rarely helpful in these situations.

2. Open it. Immediately.

Any IRS correspondence that requires response (which most do) has a pretty short window of time during which they are expecting to hear from you or your Accountant.

Typically, the IRS requires a response within 21 days or less from the date on the notice. This is already an extremely short window, so if there's any research or document gathering needed we must get to work right away. Please don't wait to open that mail.

3. Don't make assumptions.

It's a common misconception that you'll only hear from the IRS if something is wrong or someone did something bad.

These days, Social Security Numbers and EINs are put through a random lottery for examination. Additionally, every year the IRS picks one element that may or not be present on your tax return and computer generates letters that go to EVERYONE who has that specific thing present on their return. They don't tell us ahead of time what that element will be, and being examined on it doesn't necessarily mean they are going to disallow the expense or audit the rest of the return. For example, one year they examined EVERYONE who claimed a Home Office on their return.

So, while sometimes an IRS letter can mean that there is a problem, many times it just means you've won the worst lottery ever.

4. Contact your Accountant (or an Accountant, if you don't already have one).

If you have an Accountant (which we hope is us) then you should reach out to them immediately after completing steps 1-3 listed above. If you don't have an Accountant, it's probably time to hire one.

It's not recommended that you contact the IRS yourself without speaking to an Accountant first. Often, if you try to resolve the issue yourself, whatever interactions you have with the IRS before you contact us can severely limit the options that we have to resolve the issue once we get involved.

5. Send your Accountant a copy of the letter.

You wouldn't call a mechanic and say "My car is making a noise, tell me how to fix it." They need to hear the noise for themselves, and most likely see the car in order to tell you the best diagnosis and remedy.

The same is true here; unless and until we have seen the letter you received (all pages), we can't help you formulate a plan on how to proceed. If you're our client, upload that letter to our Client Portal as soon as you open it.

6. Repeat Step 1 and follow the instructions of your Accountant.

We're ready to tackle this with you, and the most helpful thing you can possible do is to remain calm while answering the questions we have and providing the requested documentation in a timely manner. We'll keep you informed on what's next, any updates and how to proceed.

Got a Nastygram? Call us: 303-284-1096

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