How To Respond To A Tax Discrepancy Letter From The IRS

Few things can feel as alarming as receiving a tax discrepancy letter from the IRS. It suggests the IRS believes something is wrong with your return, and if it’s not just an innocent mistake, they may be looking to make you pay. However, before you panic, this article will help you understand how to handle the situation by exploring:

• How to identify why you received a tax discrepancy letter
• Why you should never ignore a tax discrepancy letter
• How to respond, the timeline for responding, and who can assist you

Why Did I Receive A Tax Discrepancy Letter?

There are a few common reasons why you may have received a tax discrepancy letter from the IRS:

1. Unreported Income: One frequent issue is failing to report all of your income. For instance, if a financial institution or another payer forgets to send you a 1099 form, you’re still responsible for reporting that income on your tax return. If the IRS receives the 1099 and doesn’t see it on your return, they’ll flag the discrepancy.

2. Incorrect Deductions: Another reason could be errors in your deductions. If the IRS finds, either through an audit or other means, that you overstated deductions or claimed them incorrectly, they will send you a notice. You have the right to appeal this, but success in an appeal depends heavily on your ability to provide documentation that supports your reported deductions. Without proper documentation, appealing may not be worthwhile unless there’s an accuracy-related penalty involved.

3. Accuracy-Related Penalty: If the IRS claims you understated your income or overstated your deductions, they may apply an accuracy-related penalty, typically around 20% to 25% of the additional tax owed. This is a significant amount, so we often recommend appealing these penalties. In many cases, we can get them reduced or removed, especially through the U.S. Tax Court, as penalties like this cannot be challenged in collections.

Receiving a tax discrepancy letter can be unsettling, but understanding why you got it and whether you have the evidence to back up your return can help you decide the best course of action.

Attorney Lance Drury is an accomplished U.S. tax resolution lawyer who helps local clients in Missouri and others across the country deal with the IRS. He has a 20-year track record of successfully resolving tax discrepancies, levies, and liens, which you can now benefit from by following his advice and guidance.

However, if you have received a tax discrepancy letter, you should contact The Law Office of Lance R. Drury as soon as possible to schedule an initial consultation.

What Should I Do If I Received A Tax Discrepancy Letter After An Audit?

You have the right to appeal an audit whose result you dispute, but you will only be successful if you have the documentation to prove that your numbers are right. If you do not have such evidence, there is no sense in appealing an audit unless the IRS has tacked on an accuracy-related penalty (we can often get the accuracy-related penalty removed, which can save 20 or 25% of the raw tax).

A lot of times, we just go to the US Tax Court to get that accuracy-related penalty kicked because if you don’t, you cannot get it removed later in collections. You can get the failure to pay penalty removed or even the failure to file penalty removed, but you cannot get the accuracy-related penalty reduced, which can be imposed either due to understating your income or overstating your deductions or expenses.

What Happens If I Ignore The Tax Discrepancy Letter?

If you ignore a tax discrepancy letter, the IRS will treat the amounts they claim you owe as final, and the issue will be handed over to collections.

This means you lose your right to dispute or contest the amount, even if it’s incorrect. For example, if the IRS claims you owe $60,000 but it should only be $40,000, ignoring the letter means you’ll be stuck with the $60,000 liability.

While you may not end up paying the entire amount, ignoring the chance to dispute the claim can significantly limit your options and potentially lead to harsher collection actions.

How Long Do I Have To Respond To A Tax Discrepancy Letter?

The timeframe to respond depends on the type of notice:

• Notice of Deficiency (from an audit)
  You typically have 90 days from the date of the notice to file a petition with the U.S. Tax Court.
• Other IRS Letters
  For less formal audits or other types of letters, you may only have 30 days to respond. The exact timeline depends on the specific issue and the type of letter.

Attorney Lance Drury is an accomplished U.S. tax resolution lawyer who helps local clients in Missouri and others across the country deal with the IRS. He has a 20-year track record of successfully resolving tax discrepancies, levies, and liens, which you can now benefit from by following his advice and guidance.

However, if you have received a tax discrepancy letter, you should contact The Law Office of Lance R. Drury as soon as possible to schedule an initial consultation.

How Should I Respond To A Tax Discrepancy Letter?

There is no one-size-fits-all response to an IRS tax discrepancy letter. Your response depends on the type of action required, whether it’s a U.S. Tax Court petition, Collection Due Process hearing, or equivalency hearing. These require legal documents, which can be difficult for the average taxpayer to prepare.

In short, while you can respond yourself, the risks are high, and hiring a professional can significantly improve your chances of resolving the issue effectively. It’s often best to seek help from a tax attorney to ensure everything is done correctly, rather than trying to handle it on your own.

How Can A Tax Attorney Help Me With My Response To The IRS?

Our firm has years of experience in guiding clients through the IRS appeals process, ensuring you get everything right the first time.

Many people try to handle IRS issues on their own, especially when dealing with revenue officers, but this can lead to problems. For example, clients often come to us after receiving Form 9297 (Summary of Taxpayer Contact) and think they’ve provided everything requested, only to face a levy because something was missing.

When you work with us, we make sure that doesn’t happen. Our team knows exactly what the IRS and revenue officers need, and we ensure all required documents are submitted correctly. By handling the complexity for you, we help protect you from levies, penalties, and unnecessary stress, giving you the best chance for a successful resolution.

Have you received an IRS tax discrepancy letter? We can help.

For more information on IRS Tax Discrepancy Letters, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling 573-883-3056 today.