Money, Taxes & Small Business
Recordkeeping Tips - That Dreaded Piece of Mail
By Brigitte A. Thompson
Jan 19, 2004, 12:43

Well, it has finally happened. You are about to open an envelope which the return address indicates is from the Internal Revenue Service.

You can feel the knot in your stomach. Your heart rate increases and your palms are sweating.

Could it be a friendly letter informing you that you have an unexpected refund coming or a notice informing you of an impending audit?

It is anybody's guess, but how you address what you discover in that envelope can have a tremendous impact on your tax liability.

Although the IRS is trying to change its image into that of a more customer friendly organization, the fact remains that what they claim can make or break a taxpayer. There are some general rules that all taxpayers should follow when working with the IRS.

RULE #1 Be sure to put everything in writing and send it off by certified mail to the address listed in the IRS notice. If you need to include supporting documents, keep all originals and send them photocopies.

RULE #2 If the IRS sends you a refund check which is more than you expected, do not deposit it until you are satisfied with the explanation they provide regarding the discrepancy. If the IRS made a mistake and sent you too much money, they can demand that you repay the funds with interest from the date you deposited the check. Amazing, huh?

RULE #3 If the IRS says you owe them money for an overdue tax, it is wise to pay them. You can hold back on remitting interest and penalties if you feel you have a strong case, but be sure to write them a check for the tax due in order to avoid any additional penalties.

RULE #4 The IRS has also established the Problem Resolution office to assist taxpayers. They can be reached at 800-829-1040. You can inform them of the notice you received, explain your interpretation of the matter, and ask for guidance. It is important that you write down the name of everyone you speak with along with their badge number.

If, in spite of your best efforts, you feel that the IRS is not responding appropriately to your concerns, it would be a good idea to hire a tax professional to review you case. Their hourly fees can be expensive, but their experience in working with the IRS may end up saving you a lot of money and grief.

All information is based on the current federal tax laws of the United States. Since these laws are subject to change, neither the author nor The Moms Network assume liability for modifications that occur after the creation of this work. Every effort has been made to ensure this information is as accurate and complete as possible. This article contains general information for businesses and is offered as an overview of the law.

----------------------BIO------------------
Brigitte A. Thompson is an accountant, former daycare provider and work at home mom of three. She is the President of Datamaster Accounting Service, LLC based in Vermont. Her recordkeeping and tax books for people working in the field of early childhood education can be found on her web site, DaycareRecordkeeping.com. Her books have been used throughout the United States as reference guides and training manuals. She provides workshops for daycare providers and tax preparers. For more information, please visit her web site at DaycareRecordkeeping.com.

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