When the IRS issues a Statutory Notice of Deficiency, commonly known as a 90-Day Letter, taxpayers face a critical juncture in their financial lives. This document is not just another piece of mail to be filed away; it demands immediate attention and careful action.
Here are five common mistakes taxpayers should avoid to address this challenging situation more effectively.
#1 Ignoring the notice
One of the most critical errors is simply ignoring the letter. The 90-day period is not a suggestion; it is a deadline. Failing to respond within this timeframe can result in the loss of valuable rights, including the ability to challenge the assessment in the Tax Court without first paying the disputed amount.
#2 Missing key deadlines
Even when taxpayers acknowledge the notice, they may still miss important deadlines within the 90-day window. It is crucial to calendar all relevant dates and submit responses well before the cutoff to avoid potential issues with mail delivery or processing times.
#3 Inadequate documentation
When challenging an IRS assessment, thorough documentation is vital. Many taxpayers make the mistake of providing insufficient evidence to support their case. Gather all relevant financial records, receipts and any other supporting documents before responding.
#4 Failing to consider all options
Some taxpayers rush to agree with the IRS assessment without fully exploring their options. It is important to consider alternatives such as requesting an audit reconsideration, submitting an offer in compromise or petitioning the Tax Court.
#5 Neglecting professional advice
While it may seem cost-effective to handle the response alone, this approach can be risky. Tax laws are complex, and the stakes are high. Consulting with a tax professional or attorney can provide valuable insights and potentially save money in the long run.
Keys to a successful IRS 90-Day Letter response
By avoiding these common pitfalls, taxpayers can better position themselves when responding to an IRS 90-Day Letter. Remember, timely action, thorough preparation and legal guidance are key to successfully navigating this challenging process.