Friday, June 24, 2016
IT'S OK TO SAY NEVER
Despite what the title of the remake of the James Bond movie THUNDERBALL suggests, sometimes it is ok to say “never”.
Here are three times –
NEVER ignore a balance due notice or a request for information from the Internal Revenue Service or a state tax agency. The problem will not just go away on its own. What may eventually go away is your salary or your home.
But, on the other hand, NEVER assume a balance due notice from the Internal Revenue Service or a state tax agency is correct and just pay it. More often than not – in my experience 2/3 to 3/4 of the time – a balance due notice from the IRS or a state tax agency is wrong.
If you receive a balance due notice or a request for information from the IRS give it to your tax preparer ASAP. If you “self-prepared” the return in question (in which case the chance that the notice may be at least partially correct increases – especially if you relied on a “box” to prepare the return) review it carefully. In such a case I suggest that you consult a competent tax professional before making any payment.
A client had received a balance due notice from the NJ Division of Taxation, which was wrong, during the year and just sent NJ a check. I only learned about it during the tax filing season, and, after the season was over, have been attempting to get the money back from NJ. Believe me - it is a lot easier to explain to the IRS or the state their error upfront than it is to get money back from the IRS or a state agency many months after paying the erroneous balance due.
And if you receive a balance due notice from the IRS or a state tax agency, whatever you do DO NOT call your tax pro and tell him or her “you made a mistake”. The third never – NEVER, NEVER, NEVER assume that receiving a notice from the IRS or a state tax agency means your tax preparer made an error. As I have said above, it is more likely that the IRS or the state tax agency made the error.