Tuesday, December 6, 2011

Do I Need a CPA to reply to an IRS Notice?

Q: I received a notice from the IRS saying I owe more taxes for 2003 and 2007. I don't know why. The notice gives a number to call the IRS to ask them why I owe more money. Is this something I can handle myself?

A: Absolutely. If you feel comfortable to do so, I encourage you to call them yourself. A CPA can help you at this point, but you can handle this yourself, too.

This is what I would do: Tell the IRS agent that you don't understand why you have been assessed additional tax, but you will work as quickly as possible to resolve the matter with them. Tell them that you have contacted a CPA, and ask them to hold off on any collection or lien activities, if they have started. Usually, the agent will give you a 30 reprieve while you gather your documents together.

Then, ask for your "Wage & Income Transcript" and your "Account Transcript" for the years in question. These are free of charge and they can usually be faxed and/or mailed the same day.

The wage and income statement will let you know all of the W-2s and 1099s issued to you, in case there is one you were unaware of and did not file on. That could have caused the IRS to assess you more for a prior year.

The account transcript will include all activity for your tax account for a given year: when the return was filed, some numbers off the filed return,and whether any additional assessments were added.

Once you have that information, I suggest contacting a CPA to determine if your actually tax liability should be lower than what the IRS has assessed. If so, you may want to amend your prior year returns to give the IRS more information


If you are comfortable calling yourself, I encourage you to do so. Be aware, however, that, if you are already in collection, the agent may ask where you work, where you bank, and other information that would make it easier for them to put a lien on your property or issue a garnishment at some later point.

Be prepared to answer those questions.

If you prefer to have me contact the IRS for you, I will need a signed tax power of attorney (IRS Form 2848) allowing the IRS to talk to me about your tax situation. Please email me for more details about how I might help your specific tax situation.