Recently, the IRS has expanded correspondence examinations of individual tax returns. What is a correspondence examination? It begins with a letter or a notice in your mailbox. The IRS will never contact you by email. The most common notices are a 566 (CG) which notifies you that your return has been selected for examination and lists the items to be verified and a CP 2000 which tells you that the IRS is proposing adjustments to your return based on information from third parties.
What should you do when you receive one of these notices? Don’t just assume the IRS is correct and pay the assessed amount. The IRS makes mistakes too. The first thing you should do is contact your tax preparer. If you receive a 566 (CG), you will need to provide the IRS with copies of the documents that support the information in your tax return as requested in the letter. If you receive a CP 2000, your tax preparer can analyze the IRS notice, the associated tax return and supporting documents to determine if the notice is correct. If the notice is correct, your tax preparer will advise you to sign the agreement sent with the letter and pay the amount stipulated in the notice. If the notice is not correct, your tax preparer will need to correspond with the IRS, either by mail or by phone.
To be able to talk with the IRS about your return, your preparer will ask you to sign a power of attorney giving them permission to speak with the IRS on your behalf. Even if your preparer is able to talk with the IRS, he or she may still have to send supporting documentation to the IRS by mail. If your tax preparer deems it best to correspond with the IRS by mail, he or she should send documentation with the letter to support why there should or should not be a change made to your return. It can take several weeks for the IRS to respond to correspondence and many times, due to the lag in examining the information you send the IRS, you may receive multiple notices before the issue is resolved. It is possible that you and your preparer might not be able to resolve the issue directly with the IRS. It would then become necessary to contact the Taxpayer Advocate Service. This is an independent organization within the IRS that helps taxpayers resolve problems with the IRS. Though it can be a lengthy process, persevere and work with your preparer to resolve these issues.
About Blackman & Sloop CPAs, P.A.:
Blackman & Sloop is a full-service CPA firm headquartered in Chapel Hill, North Carolina and is actively involved in auditing, taxation, management consulting, financial planning, and related services. The firm directs a large part of its services toward providing management with advice on budgeting, forecasts, projections, financing decisions, financial analysis, and tax developments. The firm also performs review and compilation services and prepares not-for-profit, corporate, individual, estate, retirement plan, and trust tax returns as well as technology consulting services regarding installation and training on QuickBooks. Blackman & Sloop provides services in Raleigh, Durham, Chapel Hill, RTP, Hillsborough, Pittsboro, Charlotte, and the rest of North Carolina. To find out more please visit http://www.blackmansloop.com
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