ASK THE EDD ATTORNEY – WHAT TO DO WHEN YOU GET A LETTER FROM THE IRS OR EDD
By Robert S. Schriebman
It has been said that very few things are as stressful as receiving a letter from the IRS. I think the same can be said when receiving a letter from the EDD. I have been practicing tax law for close to 50 years. I get letters from both the IRS and EDD almost every day. Yet I must confess that there is usually a bit of anxiety and apprehension when I get them. In this article I would like to share with you my thoughts on “Dos and Don’ts” for taxpayers who get these letters.
Letters from the EDD are broken down into three major categories: Audit Notices, Collection Notices, and Notices concerning errors and penalties from filed returns. On the other hand, letters from the IRS are many and varied. The most familiar IRS letters are a notification of a pending audit or a series of collection letters. However there are many notices that are concerned with pending account adjustments. There are a whole new category of notices concerning identity theft and theft of refunds. The IRS is a big organization and they send out a lot of notices. This is true even though there has been in effect for many years “The Paperwork Reduction Act.” So far I have never seen a reduction in government paperwork.
Do’s and Don’ts for Taxpayers Who Get a Letter from the IRS
On June 20, 2018 the IRS issued “Tax Tip 2018-95” giving advice on what to do or not do when you hear from the IRS. In reviewing this publication, I felt that there were tips that the IRS failed to address.
These days there is heavy competition in the media for your IRS business. Not only are letters sent to people who owe the IRS, but they are using robocalls. Unfortunately there are those in this business who send letters that come very close to mimicking official IRS letterhead notices. I believe the first thing you should do when receiving any type of purported IRS notice, is to find out if it’s the real deal – actually and truly sent by the IRS. These days too the IRS has hired private collection agencies to collect past due tax deficiencies. If you are in doubt to the authenticity of any letter, contact a tax professional for his or her input.
The main thing to avoid when receiving any correspondence from any taxing agency is to ignore it. This is known as the ostrich syndrome. An ostrich is famous for ignoring things including its own eggs. If you owe the IRS for one year tax debt and you ignore being proactive, that one year can become three years before you know it. Now you are facing huge taxes, penalties and interest.
Read the letter carefully. If you are required to take affirmative action, do so. For example, you may have a short time to file a petition in the US Tax Court before the tax debt becomes final and subject to collection. You may have to file an appeal on the results of an audit or the denial of a claim for refund.
It is not uncommon in my practice to visit with a person who brings in a large box of unopened IRS letters. Unfortunately that persona may have lost valuable appeal rights that would keep the tax collector at bay.
Some letters received from the EDD or IRS simply gives you a status report of your pending matter. There is nothing for you to do. However, many taxpayers feel compelled to write a long narrative going over the same matter again. If you are not required to take any action, do not take it. In a recent Tax Court case, an IRS lawyer tried to fault a taxpayer for not responding to an IRS notice concerning a refund. The lawyer argued that the refund should be denied. The judge reviewed the letter, which stated in part, “you have given us all the information we require at this time. You need not do anything else.” By obeying the letter and not doing anything, the taxpayer complied with the instructions given by the IRS. The taxpayer won his case in the Tax Court.
Be on the lookout for clever scams. You letter may not come from the IRS, but from crooks who are trying to steal your identity and your tax refund. If you are at all suspicious – go with your gut – contact a tax professional who is experienced in reviewing and handling IRS correspondence.
To recap: make sure any correspondence you receive from the EDD or the IRS is genuine. When in doubt have a professional look it over. Read the letter carefully. If it gives you instructions to file a protest, claim or a response, do so. If it tells you to do nothing – do nothing. If it tells you to call the IRS or EDD – do so promptly. Don’t be an ostrich.
Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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