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Posted by Jim McClaflin, EA, NTPI Fellow, CTRC

Mistakes People Make When Dealing With the IRS & How to Avoid Them

Mistakes People Make When Dealing With the IRS & How to Avoid Them

Some people are lucky in their relationship with Uncle Sam as all they do is file their taxes and expect a refund or send in their balance for every tax year. Sadly, it is not so straightforward for some people as dealing with the mighty Uncle Sam comes with a series of heartache and challenges. 

The good news is that such challenges could be an error from you the taxpayer. Whatever the reason for your predicament, you can handle the IRS problem by following some rules and knowledge of your rights.


Error 1: Failure to Check Your Mail

The world is going digital, so you ordinarily wouldn’t expect paper mails and billings, Right? Well, Uncle Sam still sends paper mails as it is their way of minimizing the tendency of tax scam. As a result, Uncle Sam only communicates via your mailbox should there be any essential information. 

Some people, however, do not like checking their mails since they do not expect important information to be sent via mail. Others dread anything that has to do with Uncle Sam hence will not open any correspondence from the IRS. Sadly, ignoring Uncle Sam will not make any issue go away as it could even complicate matters, especially if you owe (think of the interest and penalties for not responding).

Error 2: Dealing with Uncle Sam Personally 

You probably think employing a pro to help you negotiate with Uncle Sam will cost you some money. What you fail to realize, however, is that not using a pro could be costly in the long run. There is a hefty tax bill waiting for you, so why add an extra burden of a professional fee? This is an error that could cost you significantly. 

Personally negotiating with Uncle Sam might make you pay for more than you should, had you called a pro to handle the matter. Uncle Sam's agent might appear friendly and all that, but don’t be deceived as their primary goal is to get you to pay the debt and close your case asap. It is not their job to advise you on money-saving ideas, and they are more like a robot who will follow their manual rather than applying tax strategies.


Error 3: Allowing Uncle Sam Prepare Your Return for You

Uncle Sam will prepare what is called Substitute for Return for you and charge you for their estimated balance for people who did not file a tax return for many years. They take the headache of filing away from you, and you believe that is a good thing? No, No, it isn't good. 

Should the IRS file a return for you, it will have neither dependents nor deductions. They might classify you as a single filer, yet you qualified and would have been better off as Head of Household. Deductions like charitable contributions, medical expenses will be forfeited. 

So have in mind that you will owe a pretty more enormous amount if Uncle Sam files for you. However, it is possible to amend an SFR.


Error 4: Not documenting all essentials

The IRS is a gigantic agency, and at times, mails could be lost, and payment wrongly applied. In cases like this, an accurate record of your entire correspondence will be a lifesaver. 

Every time you mail a return, request for extension or anything to Uncle Sam, be sure to forward a Certified Mail Return Receipt Requested, which will serve as your proof of mailing date. For all payments done online, have a record of such receipt, which reveals your payment confirmation number. Even with a phone conversation with any IRS official, have your record of the date, badge number, name and other details about the call. 

Error 5: Taking No for an Answer 

Many people do not realize that any assessment from the IRS isn’t final, including penalties. The IRS might send you a report detailing their adjustment to your balance. Deep inside that legal mumbo jumbo are details on how you can appeal their decision as well as the explanation. 

An appeal conference is a meeting involving an impartial officer who tries to mediate an issue between Uncle Sam and the taxpayer. The idea is to resolve the problem without having to enter the court. You can hire a professional to stand for you during the appeal process, provided the professional can practice before Uncle Sam.



Jim McClaflin, EA, NTPI Fellow, CTRC
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