The IRS processes nearly 155 million individual tax returns each year. It catches enough errors or supposed errors itself that it sent out 1.6 million notices related to math errors a few years ago. Even though the Service focuses on catching these mistakes, it also can make them. And it isn’t only the IRS that makes them, employers, HR departments and tax preparers make them.
We often encounter tax problems and audit situations that started with a simple mistake. It isn’t initially caught and then the problem grows. It is only identified when it’s become a back tax bill of thousands of dollars. There are options available.
IRS mistakes are actually quite rare. In fact, a 2017 study by the Treasury Inspector General for Tax Administration found that the IRS makes errors in less than 1% of the returns it processes. That means that for every 10,000 tax returns filed, the IRS makes an error on just 100 of them.
Of course, even a 1% error rate is still too high for some people. After all, we’re talking about billions of dollars in taxes here. So what happens when the IRS does make a mistake? Well, first of all, it’s important to note that taxpayers are not responsible for paying any interest or penalties on erroneous tax bills. And if you believe that you’ve been incorrectly assessed a tax bill, you can file an appeal with the IRS. The appeals process is designed to give taxpayers a fair hearing and ensure that they are only required to pay taxes that they actually owe.
Gather your paperwork together. If you find an IRS mistake, write a letter that clearly explains the error and then attach documentation showing that what you filed was accurate.
If your employer accidentally sent two versions of a W-2, the IRS might double your income and assess a significant tax bill. By writing to explain the error and attaching documentation, you can often resolve the issue. You should receive a response in several weeks. If you do not, it is crucial to follow up or the situation could get worse.
When a letter and explanation does not solve the issue, the next step is often to file a written protest with the IRS Office of Appeals. This independent organization provides an objective point of view in resolving tax disputes. Programs such as Fast Track Settlement and mediation often can resolve issues at the early stages of an audit or collection efforts.
Before filing a formal protest, it is often helpful to seek legal advice to ensure you make the strongest possible argument with the first appeal. Some of the things that must be included in a protest are:
With any administrative hearing process, it is important to lead with your strongest arguments. And when you worry that the IRS did not correctly apply the law to your situation, individualized legal counsel may be the difference between winning early or long and drawn out litigation.
Fixing a mistake with the IRS is not quite as easy as a billing error with a local company. It can be extremely difficult to reach an agent as well. If your initial attempt to resolve a mistake goes nowhere, get a free consultation from a tax attorney.
Send an email to get more personalized legal advice, so you can decide on next steps.
The attorneys of our firm — led by Chad C. Silver — bring more than four decades of federal tax defense experience to the legal matters facing our clients. For a competitive price, they can help you find an efficient resolution to your tax issues and keep the IRS from pushing you around. Learn more About our attorneys or Contact us today.
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