Maximize Your Green Business Tax Savings
Category: Business
When you receive a notice from the IRS, your first response might be to assume you’re in trouble.
Don’t panic yet. Although it’s true that the IRS does not send out notices just for fun, there are many possible reasons why you may have received one, and it is not necessarily a cause for alarm.
Every year, the IRS sends millions of letters and notices to taxpayers, often requesting more information, correcting a mistake, or clarifying something unusual about your tax return or financial situation. Many of these issues are quick and easy to resolve, and they do not necessarily mean you have broken the law or are at risk of undergoing an audit!
Remember, a notice is just a notice.
You should still take any communication from the IRS seriously and give it your prompt and thorough attention. Even if the notice does not contain bad news, the consequences of ignoring it can be harsh and costly, including interest, penalties, or even more aggressive action from the IRS.
Read on to discover what you need to understand and what you should do and not do if a notice from the IRS turns up in your mailbox.
First, it’s good to double-check the return address to confirm that the letter or notice is from the IRS and not another agency, like a state tax department. If it is, in fact, from the IRS, it will offer specific instructions on what you need to do to satisfy the inquiry. On the other hand, if the letter or notice is from a different agency, you may need to contact that office with any questions you may have.
Additionally, make sure you are not falling victim to a scam. The IRS will never contact a taxpayer using social media or text messages. Instead, the first contact from the IRS will usually come in the mail. If you are unsure whether you owe money to the IRS, you can view your tax account information on IRS.gov.
The next step in understanding your IRS notice is obvious: Read it carefully.
There are various reasons the IRS sends notices to taxpayers, such as requesting payment of taxes, notifying the taxpayer of a change to their account, or requesting additional information.
If you are still confused, you can look up the type of notice you’ve received using the IRS’ Notices and Letters Search Tool. Enter the CT or LTR number of your notice, which you can find in the top or bottom right-hand corner of the page, and find more information.
Generally, the notice or letter you receive will cover a specific question or issue regarding your account, and you can usually address it without calling or visiting an IRS office. However, if you have questions, you can also contact the telephone number in the upper right corner of the notice. Have a copy of your tax return and the correspondence available when you call.
Once you understand your IRS notice, you’ll need to be proactive in responding appropriately. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry, and sometimes the notice will require a response by a particular date. If that is the case, it is in your best interest to comply for two main reasons:
If the notice shows that the IRS has corrected your account, generally speaking, no further action is required as long as you agree with the correction and do not owe any payment. If you do owe payment and agree with the debt, pay as much as you can as soon as possible, even if it is not the full amount you owe.
On the other hand, if you do not agree with the correction, you must respond as requested to the IRS in writing to explain why you disagree. Be sure to include any documents and information that may support your point, along with the contact stub at the bottom of the notice. You can mail the above to the address shown on the letter and allow at least 30 days for a response.
As a general rule, always be courteous and respectful during interactions with the IRS. This is a good idea for several reasons. The process that applies to you most likely can’t be avoided, regardless of your demeanor, so there’s nothing to gain by aggression or impoliteness. Additionally, however, the IRS can waive penalties when allowed by law if you can show you acted reasonably and in good faith.
Sometimes the process can be frustrating, especially if you feel that an IRS employee is causing delays by making errors or giving you incorrect advice. But, if you can demonstrate that this is the case later in the process, the IRS may waive interest that resulted from those delays or mistakes. Therefore, it is in your best interest to maintain a courteous and respectful tone.
Finally, keep a copy of the notice or letter for your personal tax records. You may need this and other documents at a later stage.
IRS employees must explain and protect your rights as a taxpayer throughout your contact with them. As such, the IRS will not disclose the information you provide to anyone except as authorized by law.
You have the right to know why they are asking you for information, how they will use it, and what will happen if you do not provide the requested information.
Furthermore, you have the right to professional and courteous service. If you believe that an IRS employee has not treated you in a professional, fair, and respectful way, you should tell that employee’s supervisor. If the supervisor’s response is not satisfactory, you can write to the IRS director for your area or the center where you file your return.
Among your rights, you are also entitled to representation when dealing with the IRS. You may choose to represent yourself or, with proper written authorization, have someone else represent you in your place. That representative must be someone who is allowed to practice before the IRS, such as an attorney, certified public accountant, or enrolled agent. If you are in an interview and ask to consult such a person, then in most cases, the IRS agent must stop and reschedule the interview. You can have someone accompany you to an interview, and you may create sound recordings of any meeting with IRS personnel, provided you inform them in writing ten days in advance of the meeting.
Your rights also include help from The Taxpayer Advocate Services if you cannot resolve a problem with the IRS. Finally, you have the right to avail yourself of the IRS Appeals and Judicial Review process, and you may also ask a court to review your case.
You can minimize the likelihood of encountering future problems with the IRS by:
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Jeff Coyle, CPA, Partner of Rosenberg Chesnov, has been with the firm since 2015. He joined the firm after 20 years of business and accounting experience where he learned the value of accurate reporting, using financial information as a basis for good business decisions and the importance of accounting for management.
He is a diligent financial professional, able to manage the details and turn them into relevant business leading information. He has a strong financial background in construction, technology, consulting services and risk management. He also knows what it takes to create organizations having built teams, grown companies and designed processes for financial analysis and reporting.
His business experience includes:
Creating and preparing financial reporting, budgeting and forecasting.
Planning and preparation of GAAP and other basis financial statements.
Providing insight on financial results and providing advice based on those results.
Jeff also has a long history of helping individuals manage their taxes and plan their finances including:
Income tax planning and strategy.
Filing quarterly and annual taxes.
Audit support.
General financial and planning advice.
Prior to joining the firm in 2015, Jeff was in the private sector where he held senior financial and management positions including Controller and Chief Financial Officer. He has experience across industries, including construction, technology and professional services which gives him a deep understanding of business.
Jeff graduated from Montclair State University, he is a CPA and member of the American Institute of Certified Public Accountants, New York State Society of Certified Public Accountants and New Jersey State Society of Public Accountants.
Jody H. Chesnov, CPA, Managing Partner of Rosenberg Chesnov, has been with the firm since 2004. After a career of public accounting and general management, Jody knows the value of good financials. Clarity, decision making, and strategy all start with the facts – Jody has been revealing the facts and turning them into good business results for more than three decades.
He takes a pragmatic approach to accounting, finance and business. His work has supported many companies on their path to growth, including helping them find investors, manage scaling and overcome hurdles. His experience and passion for business reach beyond accounting and he helps businesses focus on what the numbers mean organizationally, operationally and financially.
He has a particular expertise in early-stage growth companies. His strengths lie in cutting through the noise to come up with useful, out of the box, solutions that support clients in building their businesses and realizing their larger visions.
Prior to joining the firm in 2004, Jody was in the private sector where he held senior financial and management positions including General Manager, Chief Financial Officer and Controller. He has experience across industries, which gives him a deep understanding of business.
Jody graduated with a BBA in Accounting from Baruch College, he is a CPA and member of the American Institute of Certified Public Accountants and New York State Society of Certified Public Accountants.
In addition to delivering above and beyond accounting results, Jody is a member of the NYSCPA’s Emerging Tech Entrepreneurial Committee (ETEC), Private Equity and Venture Capital Committee and Family Office Committee.
He is an angel investor through the Westchester Angels, and has served as an advisor for many startup companies and as a mentor through the Founders Institute.