For most people, getting an IRS notice in the mail produces some level of anxiety and fear – and for good reason. The IRS doesn’t send birthday greetings or letters of appreciation for paying you taxes in a timely manner; any news will probably be bad news, like notification of an error or an upcoming audit. Even the occasional good news that you have a refund you didn’t expect can turn out to be a headache, as it resulted from some past mistake in figuring the amount due, the timeliness of filing or confusion over how a payment or refund is applied.
We are seeing more and more IRS notices. Once your return is filed, if you don’t get a notice of some sort you are in the minority. As a result we are spending much more of our time talking to the IRS about these notices. These are not audits. These notices are generated for a number of reasons:
- Taxpayer Error: incorrectly reporting the amount of taxes paid through estimates, insufficient or incorrect information on the memo line of taxes paid, incorrect marketplace insurance information, missing 1099 and other income information, etc. Very rarely are they for calculation errors (computers have NEARLY solved that problem).
- Preparer Error: We are human and so we make mistakes. We try our hardest to have checks and balances in place to avoid them. When we do make them, we are accountable.
- Software Error: Just this year, our incredibly reliable tax software company refunded our entire fee because of the programming errors they made. Again, they are human and the magnitude of changes that took place this year was mind bending.
- IRS Error: What is different this year is that we are seeing a high number of IRS errors; just today, I had four. One was a bit surprising – the IRS missed a calculation on one of their new forms that should have been automatically transferred. The tax they assessed of $700.00 was incorrect. Another client did not have to pay the $3,000 the IRS claimed she owed. The other two were because payments made were not recorded to the proper accounts. In each case, it took us about an hour on the phone with the IRS to sort out the issue and get the taxpayers accounts corrected.
Getting correspondence in the mail from the IRS is automatically stress-inducing. Don’t assume they are correct. Bring the notice to us and we will help sort it out.
Editorial note: Paying taxes has long been more complicated than it should be, and with the new tax law the situation has become worse. It is very easy to blame the IRS for the situation, but in my experience, the people at the IRS want to get it right. Whatever you think of its goals, the roll-out of last year’s new tax laws was terrible. As a result, the system is clunky, error prone and expensive to operate.
Such a complicated system will never be error free, but it could have been far better with checks and balances looking for typical errors built in at the IRS level. With a little patience and proper funding from congress, it would have been far better. It could be fixed, but probably won’t be.