Tuesday, June 28, 2016

Dealing with an IRS Notice

This past weekend, I checked Where's My Refund and learned that the IRS had revised our 2015 tax return and reduced our refund by about 10%.  The IRS would be sending me a notice this week with the details.  Per usual protocol,  the IRS offered two options:  accept the adjustment and do nothing or dispute the adjustment if I didn't agree.  Many people I know just accept the adjustment rather than deal with the IRS.   I, on the other hand, assume I will dispute the change since based on experience as a tax preparer, I have found the IRS is incorrect (at least partially) about 80-90% of the time.

Here is my approach to dealing with an IRS notice.
  1. Understand the exact reason for the adjustment.  Fortunately, Where's My Refund provided the details of why my return was changed.  It specified that an incorrect number had been transferred from Schedule D to Form 1040.
  2. Check a copy of the return.  Since I do our return by hand, I always make a copy to keep for reference.  Upon inspecting my return, I notice that I forgot to put parentheses around a negative total.   So the IRS calculated the total as positive, even though a math check would have shown the value was negative.
  3. Call the IRS early in the day.  On Monday morning, at 7:05 AM, I called the IRS and was connected to a representative in less than 5 minutes.  I tried calling back at 7:45 AM and was disconnected due to "unusually high call volume" and instructed to call back at another time.
  4. Determine what needs to be done to correct the error.   Since the only error was a missing negative sign, the adjustment was categorized as a "math error"  and could be corrected over the phone.  The representative agreed with my explanation of the missing negative sign and recalculated the results, which matched my original return.   So the error was corrected, and my original refund was reinstated.   If needed, I was ready to file an amended return, but that wasn't necessary.
Granted, I have several years of experience working with the IRS, which makes the interaction less daunting.  For example, most people I know would rather stick a pin in their eye than interact with the IRS.  However, I have found that the IRS is usually very good at arriving at the same position I have once all the relevant facts have been presented to them.

For more on Ideas You Can Use, check back every  Tuesday for a new segment.

This is not financial or tax advice. Please consult a professional advisor.

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