The Internal Revenue Service (IRS), as well as most of the state and local departments of revenues, catch up on their random reviews of taxpayer accounts annually over the summer months.  It is NOT unusual for businesses, individuals, and non-profits to get tax compliance letters from these government organizations during June, July and August.  Do NOT panic if you receive a letter!  DO READ the letter, ADDRESS THE REQUESTS, and PROCEED with completing the required tasks BEFORE the due dates to respond.

Many letters are routine, simply informing you that you have a small amount due or being refunded.  Often, the IRS or other governmental entity, wants more information about an entry (entries) that you put on your tax return(s).  Sometimes a reconciliation of your estimated tax payments against your tax return payments entries has been updated.  Sometimes, the auditors want you to review a preliminary assessment, and to respond with your agreement, partial agreement, or disagreement by a certain date, BEFORE an assessment will be determined and applied to your account.  This is YOUR OPPORTUNITY to present your viewpoint of what you owe or what you claim to be the true picture of your account liability.  Not responding, or responding with little care for the consequences, can result in negative consequences, and yes money due, for you.

Take the following steps when you recieve a letter from the IRS or other governmental entity:  1) verify that the letter references your business, individual or non-profit tax account; 2) determine the issue addressed in the body of the letter; 3) note the information or action that the governmental entity is requesting of you; 4) locate the specific records or additional information to verify what you need; 5)  contact your accountant, attorney or other relevant professional advisor if needed; 6) write your response with documentation attached; 7)  return your response form included with the original governmental letter, along with your response and documentation behind this, in the return envelope or fax to the person specified in the governmental letter; 8) make sure that you have referenced the form letter per the instructions and that you have kept a copy of what you sent to the governmental entity; 9) make sure that you do not miss the specified due date for providing the response so that you safeguard your taxpayer rights.  Act promptly, conscientiously, and thoroughly in responding to all IRS or other governmental entity letters. 

Your tax advisor can assist you with the process, but has NO OBLIGATION to answer letters for you just because he/she did a tax return for you.  You, the taxpayer, are responsible for providing your information to the IRS and other governmental entities in a clear and accurate manner.  Requesting additional help with IRS or other governmental responses, or representation at hearings, normally requires additional hourly service fees paid to the accountants or attorneys who provide such services.  This is their livelihood, in which they have lots of education, experience, and money invested in.  They rightfully deserve to be paid for work done beyond mere tax return preparation time.  Licensed Enrolled Agents (EAs), Certified Public Accountants (CPAs), and Attorneys (JDs) spend lots of time and money each year to keep up with compliance knowledge.  Most of them work very hard to serve their clients and most of them are indeed conscientious and ethical.  Ask about their credentials before engaging them and select the tax professional of your choice.  Visit the websites for the National Association of Enrolled Agents (NAEA), American Institute of Certified Public Accountants (AICPA), or the American Bar Association (ABA) for information about each professional designation and its requirements.  Be an informed consumer in utilizing professional tax compliance services.

You will hear back from the IRS or other governmental entity if there is a determination required, or if they require more information or payment from you.  The important thing is for you to make a good faith effort to always be compliant with the tax laws and to be forthright in providing accurate information.  You are not expected to pay a greater liability than you truly owe, but you are expected to pay your fair share of taxes.  Responding to leters with these principles in mind, will ensure that your rights are protected, and that the public good is promoted.