When employers receive an IRS notice for their business, they often panic and sometimes assume they are about to get audited. Audits are not usually triggered by a single tax notice. In fact, budget constraints with the IRS have caused a reduction in some types of audits. The majority of notices sent from the IRS are usually regarding tax returns and their respective payments.
Common letters include refund or balance due notices, missing tax returns, or a request for more information. In addition, if you have initiated correspondence with the IRS, you may receive follow up notices informing you that they need more time to respond.
While notices can be alarming, try not to panic. Instead, take action quickly to initiate a response and resolution. The worst thing you can do if and when you receive a notice is to ignore it.
What do I do?
Upon receipt, review the notice for validity. Notices from the IRS are currently mailed. Unless you are working with an IRS Agent on something specific, you will never receive an email from the IRS requesting information. The IRS has a page on their website where you can enter the notice or letter number to find out more about that type of notice. It allows you to view a sample notice and includes a link to report suspicious emails, phone calls or requests for information (the IRS will never ask for personal information to be communicated via email or unsolicited phone calls).
Next, identify key information, including tax year, tax or form type and reason for the notice. If the notice relates to corporate taxes, get in touch with your CPA for assistance on researching and resolving the notice. If the notice relates to payroll taxes, forward the notice your Payroll Service Provider that handled your account for the quarter and year listed on the notice.
If the notice is caused by an error in payment or filing, a penalty may be assessed. There is a process for requesting abatement from the IRS, but their reasons for waiving or abating a penalty need to be satisfied. There are times that a balance due may be cause by the IRS not having all of the information they need or having incorrect information. At times, submitting updated information will remove the balance. Be sure to work with your third party vendor to determine if the amount on the IRS notice is owed.
Responding promptly is important for a few reasons. Interest is calculated on amounts owed to the IRS. Therefore, the longer a balance is unpaid, the higher the amount becomes. If a balance due is outstanding too long, the IRS may impose a levy and simply take the funds from the company’s bank account. A notice of Intent to Levy will always be mailed prior to any levy action.
The best way to prevent tax notices is to file your returns and pay your tax in a timely manner. IRS guidelines hold the employer liable for any and all tax-related matters. Therefore, if you use a third party for payments and filing, it is still your responsibility ensure accuracy and timeliness. The IRS and most other taxing agencies provide an online account that the employer can access to monitor their account and verify that the third party has filed and paid on time.
PAYDAY’s compliance team is experienced in researching and resolving IRS notices. If you have any questions or have received a notice that you need assistance with, give us a call at (714) 467-3434 and we’ll be happy to help. PAYDAY can also provide you links to register for online access with the IRS or other taxing agencies in order to monitor your accounts.