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Received a Tax Notice? Key Mistakes to Avoid

There's nothing quite as stress-inducing as receiving an official notice from the IRS or your state tax agency. The presence of the agency’s logo and the formal tone often sparks anxiety and a sense of dread. Before reacting hastily, take a step back and breathe.

Most stress linked to tax notices doesn’t arise from the notice itself but how swiftly one reacts to it. Here's a strategic guide on what to avoid doing when you receive a tax notice and why staying calm is crucial.

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Don't Assume You’re at Fault

Tax authorities issue millions of notices annually, many merely being:

  • Clarification requests

  • Automated error checks

  • Follow-ups on missing information

  • Balance statements unaware of recent payments

Receiving a notice isn’t synonymous with being guilty. Often, these are procedural requests for information verification.

Don’t Overlook It (Even When You Want To)

Ignoring a notice can quickly escalate a minor issue into a significant problem. Unattended notices can result in:

  • Missed deadlines

  • Increasing penalties and interest

  • Reduced resolution options

This concern is equally applicable to both IRS and state agencies, as many state agencies have stringent enforcement policies.

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Don’t Contact Tax Agencies Without Preparation

This can surprise many, but contacting an agency without understanding the notice can:

  • Lead to incorrect assumptions

  • Result in partial or inaccurate explanations

  • Complicate issues if the notice is complex

Agencies prioritize procedural rectifications over contextual understanding, making unprepared calls counterproductive.

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Don’t Pay Immediately to “Solve” It

One prevalent mistake is making a payment without verifying the notice. This rash decision can lead to:

  • Overpayments

  • Overlooking potential credits or deductions

  • Conceding to disputes prematurely

After a payment is initiated, correcting errors becomes challenging.

Don’t Hastily Amend Returns

Amended returns have their purposes, but proceeding without caution can be detrimental:

  • Prolonged processing times

  • A trigger for further reviews

  • Additional complications if inaccurately filed

Strategize your amendments to avoid unnecessary stress.

Avoid DIY Resolutions

Some notices may appear simple; others may not be. A minor discrepancy might signal:

  • Withholding issues

  • Reporting inconsistencies

  • Estimated tax concerns

  • Carry-forward errors

Handling these alone can be stressful, especially with time limitations.

Recommended Actions

A careful approach generally involves three steps:

  1. Read the notice thoroughly

  2. Discern the actual request from the agency

  3. Ensure timely and precise responses

Partnering with a tax professional can streamline this process, minimizing emotional distress.

Conclusion

Getting an IRS or state tax notice can be nerve-wracking but doesn’t have to be an ordeal. Most complications arise from hasty reactions.

Received a tax notice? Contact our office before initiating a response. If you’re a client, involving us early allows for a review of the notice, an accurate understanding of the requirements, and addressing the issue with minimal stress.

Note

This material serves educational purposes, not as legal advice. Tax notices differ, and personal situations matter. For legal advice, consult an attorney. For IRS or state notice assistance, contact your tax advisor.

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