More than 9 million taxpayers received post-filing notices after filing their tax returns last year. In many cases, notices have been automatically generated and are requesting additional information or clarification. It is very important to respond by the deadline if the letter or notice requests a response.

The IRS is relying more on automation and less on in-person contact. The trend is expected to intensify in the near future. IRS Commissioner John Koskinen told attendees to an AICPA conference in November 2015 that the 2016 tax filing season will be challenging for the IRS. The IRS’s budget is at the lowest level since 2008. The reduced budget has led to a reduction in staff and the reduction in staff has led to a reduction in service. For example, in 2015, wait times to talk to an IRS agent on the phone frequently exceeded 30 minutes and, at many times, less than 40% of the calls were answered. In order to reduce hold times, the IRS instituted a “courtesy disconnect,” which automatically disconnected callers who had been on hold for two hours.

The challenges facing the IRS have a direct impact on taxpayers. The nature of computer generated letters are, by necessity, more general and contain broader language. The lack of specificity in the letters often times leads to confusion and may lack clarity as to how the letter applies to a specific tax return. 

Most notices require that the IRS be contacted in writing or by phone in order to resolve issues. The IRS receives more than 100 million telephone calls and an average of 10 million pieces of correspondence from taxpayers each year in response to notices. IRS letters and notices generally provide a time frame in which a response is requested. Depending on mailing delivery, some taxpayers may find that the response due date has passed before the letter is received. The system is programmed to send a follow up letter if no response is received within that allotted time frame. 

Tax-related identity theft and the filing of fraudulent tax returns is an important issue facing the IRS and taxpayers. Tax-related identity theft is when someone uses a stolen social security number to file a tax return claiming a fraudulent refund. The total number of fraudulent refunds is not known but, in the 2013 filing season, the IRS estimated that over 5 million tax returns were filed using stolen identities.  Fraudsters used stolen identities to hack into the IRS’s “Get Transcript” service last year to access the accounts of at least 700,000 taxpayers. This year, fraudsters used stolen identities to obtain IP PINs (personal identification numbers) for at least 100,000 Taxpayers. The IRS created the IP PIN as a second identification factor for use primarily by taxpayers who have experienced a tax-related identity theft.  Some letters from the IRS request that a taxpayer their verify identity or confirm that a tax return is legitimate.

Here are some basic things to do, if you receive a letter from the IRS:
1.  Confirm that the information on the notice pertains to you.
2.  Review the notice carefully for instructions.
3.  Contact your tax preparer concerning any requests for clarification or proposed adjustments.
4.  Do not ignore IRS letters or notices that request a response.

In addition to the above, it is important to know that contact by the IRS will be in writing. Phone calls and e-mails from individuals purporting to be with the IRS are generally part of a phishing scheme in an effort to obtain personal information to file fraudulent returns or other identity theft activities.

Please contact your tax advisor to assist in responding to IRS notices or inquiries. In many cases, you will be required to provide written authorization for the tax preparer to contact the IRS on your behalf.