My brother is a wine connoisseur. As all my friends know, I’m anything but a wine aficionado. But I have learned one difference between fine wine and a notice from the IRS: Wine can age very well but IRS notices don’t.
Almost all IRS notices come with deadlines. You need to act to stop the IRS. If you ignore the notice, you usually will get a second notice. After that, you may receive a Notice of Deficiency. If that ages the tax is assessed.
Yet most IRS notices are wrong in whole or in part! The last study I saw showed that two-thirds of IRS notices are wrong. That’s a shockingly high percentage. An obvious question is why doesn’t the IRS change its procedures so that the bad notices aren’t issued? The answer is simple: People pay those notices. The IRS’s Automated Underreporting Unit is a huge profit center for the agency.
What does this mean for you? Put simply, if you get an IRS notice read it carefully. Let your tax professional know about it when you receive it, not on the day a response is due. It’s a lot easier (and cheaper) to act earlier in the process than later.
And be very careful this year: Many IRS notices have new deadlines. The IRS printed approximately 20 million notices before the shutdown and are now sending those out. The deadlines on these notices are wrong and the IRS included an insert with the correct deadlines. If in doubt, send all pages of the notice to your tax professional and ask him or her what the deadline is.
My brother tells me that some of the best wine he’s tasted have been old varietals. I can tell you that I’ve never seen a tax notice get better with age.
Tags: BozoTaxTips