January 2018

The Annual Routine

Every year you go through the same routine and you promise yourself to start much earlier next year. Cereli hopes to make the task a little easier starting this year. Just register at cereli.com, a process that requires filling out four items. After that you will have your own password protected environment in which you can use a Tax Organizer to enter pertinent information. You can also upload or download tax files in the same safe area. Tip: Look for the green padlock symbol at the top of your browser in the address field. This is confirmation that you are in a secure site.

Time to be Paranoid? Last year a couple of clients called in a panic because they received calls from the IRS demanding payment right away. In each case the caller used information that was easily got and added some intelligent guessing to the nefarious mix. One client was even bombarded by a team acting as IRS collectors and a supevisor.
That was last year. This year they are even more aggressive going after not just taxpayers, but their preparers and the human resource departments of companies.
So what can you do to protect yourself? A great deal just by being disciplined in safeguarding your private information and knowing exactly how the IRS communicates with you in the first place.

First you should know that the IRS initiates most contacts through regular mail delivered by the United States Postal Service. There are several reasons why you might receive a notice or letter:

  • You have a balance due
  • You are due a larger or smaller refund
  • There is a question about your tax return
  • They need to verify your identity
  • They need additional information
  • Your return was changed
  • You need to be notified of delays in processing your return.

Let us concentrate on the first item: You have a balance due.
You generally receive several letters (called “notices”) from the IRS in the mail before the Agency actually takes any kind of action which follows a specific order. The steps are as follows:

  1. A CP2000 Notice which is not a bill, but a request for clarifying information. You can respond within 30 days directly by the means indicated in the letter and you can even send them a Power of Attorney Letter (usually IRS Form 2848) allowing a third party such as your tax preparer to respond on your behalf.
  2. If you have not replied after the 30-day period, a Statutory Notice of Deficiency will mailed. This notice is also referred to as a "90-day letter" which is the time allowed to respond. Please note that neither the IRS nor the Tax Court can extend the deadline. If you allow this deadline to pass, you potentially lose the ability to contest the accuracy of the proposed assessment.
  3. If the case has progressed to the point where it is no longer a matter of examination but assessment, that is the point at which IRS collectors come into the picture and not before. Even then taxpayers are issued a Notice of Intent to Levy a Tax Lien assuming there are assets available to satisfy any assessment. The taxpayer then has 30 days to respond to the notice. If a levy does take place, you have seven days to take action to satisfy the assessment.

You can see from the above, that the IRS follows steps designed to avoid infringing on your rights. In otherwords, the IRS is not going to bust down your door in the middle of the night because they disagreed with the tax return you filed two months earlier.