Magazine article Work & Family Life

Need-to-Know Information about Taxes and the IRS

Magazine article Work & Family Life

Need-to-Know Information about Taxes and the IRS

Article excerpt

You receive an email from the Internal Revenue Service that says: "We need you to clarify information that was filed as part of your tax return."

You worry that you may have done something incorrectly when you filed your taxes, and you want to correct the problem as soon as possible to avoid an audit.

But don't click anything.

According to USA.gov, "The IRS does not initiate contact with an individual taxpayer by sending an email, text or social message requesting personal or financial information."

As with any request for your personal information, double and triple check its legitimacy before taking any steps forward.

This also applies to phone calls supposedly from the IRS that are actually scam efforts. The official IRS website has a place where you can report any such activity.

If a tax return is audited

A small minority of tax returns are subject to questions or, in some cases, an IRS audit. And, if this happens, the Consumer Reports Money Adviser offers these tips.

* DON'T KEEP PEOPLE WAITING. If you get a letter from the IRS, open it immediately. The agency may have flagged a deduction from an expensive business trip that you will need to defend. Or it could have made a mistake with a Social Security number that can be easily spotted and fixed.

If an answer is requested, meet the deadline. A delay can be costly. For example, if a specific deduction or credit is questioned and you do not respond in time (typically 10-30 days), the IRS will close the case and send you a note such as Form 4549, "Income Tax Examination Changes."

This disallows the tax break in question, and it usually gets a taxpayer's attention. These cases can be reopened, but it's not a good way to start the audit process.

Deal with even routine letters right away. It could be a Notice CP2000, indicating that information from an employer, bank or investment company doesn't match what you reported. A phone call could clear that up.

If you don't understand what the IRS wants, talk to your preparer or go online to irs.gov/individuals/understanding-your-irsnotice-or-letter for a list of notices and what they mean.

* BE PREPARED. Your best defense in an IRS query is documentation. Let's say the agency wants you to prove that a money-losing home business is not just an expensive hobby. …

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