If you’ve just received your first IRS notice, don’t worry. IRS folks aren’t on their way to knock down your door and threaten you until you pay your taxes.
However, that’s what many small business owners imagine — though probably less hyperbolically.
Regardless of your notice, the first thing you should do is take a deep breath. IRS notices for small business owners are harmless more often than not. Done exhaling? Now contact a tax advisor as soon as possible. They can let you know what actions you need to take, if any.
The worst thing you can do with an IRS notice is ignore it. If you truly owe something, then you might be accruing interest on penalties — so the longer you ignore it, the more you’ll owe.
Before you act on your notice, these are some things you should do — and things to avoid during the process.
A tax notice is a letter from the IRS that notifies you if:
There are dozens of other possible tax notices you can get. It can be as simple as requesting more information from you or something more serious like an audit. The IRS lists all possible notices on this 10-page list. If you have a registered agent, the IRS will direct notices to them instead.
Every tax notice lists the reason you’re receiving it and the next steps to take. There’s also a section on what happens if they don’t hear from you and additional resources on your notice. There may be more information than that depending on your notice.
You should always stay calm when you receive a tax notice from the IRS. Not every notice requires action from you — or your money.
The next step you should take is hire a tax professional. A CPA or other kind of tax professional, like an enrolled agent, can either guide you through the process or handle the whole thing for you. That leaves you with less stress and more time on your hands to run your business.
You shouldn’t do anything about your tax notice without consulting a professional first.
The IRS might be wrong. Both the people and the computers of the IRS can make mistakes sometimes, which can cost you time and money. By talking to a tax pro, you can see if you really need to pay the money they’re asking you for and take the best course of action.
There’s something even worse than responding without the help of a CPA, enrolled agent or other tax professional: ignoring the IRS.
You should never ignore an IRS notice — either intentionally or unintentionally. If it’s about a balance or penalty, that amount could be accruing interest every day you ignore it. Your notices can escalate quickly and become increasingly threatening. You shouldn’t have to worry that a notice about your unpaid tax bill might turn into a notice to seize your property.
Above all else, you shouldn’t stress out about your tax notice. That last example was a bit grim, but those scenarios are highly unlikely for small business owners. Stress can lead to you acting without the help of a professional and maybe coughing up more money than you need to.
Tax notices from the IRS can range from a friendly reminder that you’re receiving a refund to a warning that they’re about to seize your property. Whatever the case may be, it’s important to stay calm.
The next most important thing you should do is call a tax advisor to help you take the next steps. Determining where and how to respond to the IRS can be confusing if you’ve never done it before. Thankfully, you don’t have to do it alone.
Talk to your tax advisor if you ever receive a tax notice and let them help you through the process. Doing it right could save you money if the notice turns out to be a mistake. Don’t have an advisor? Schedule a free call with a DiMercurio Advisors team member today and get your notice resolved as soon as possible.