Have you Received a Letter from the IRS? Don’t Panic!

No one is happy to receive a letter from the IRS, but it does happen.  Before you panic, check out the following recommended steps to help make the process go smoothly:

1.) Make sure the letter is the real deal – IRS scams are common and before you make a payment or provide personal information to someone pretending to be the IRS, determine the letter’s authenticity.  “It’s important to remember that the IRS does not call or email tax payers so if you receive something through either of those mediums, it’s a scam,” advises Conrad Levesque, CPA.  “If you receive a letter, don’t automatically assume it’s genuine either.”

The IRS offers several tips (https://www.irs.gov/privacy-disclosure/report-phishing) to determine whether or not you’re being scammed.  You may also call 1-800-829-1040.

2.) Once you’ve determined that the notice received is in fact from the IRS, it’s important to note any deadlines.  Missing a deadline can result in additional penalties.

3.) Contact your accountant – just because the letter is genuine does not mean you necessarily owe what the notice indicates you do.  The IRS can make mistakes!  Before you get out your checkbook, have a professional look over the notice and the corresponding tax return/documents.  It is not uncommon for a letter from your tax preparer and supporting documentation to clear up an error on the part of the IRS.  If you do in fact owe, at least you will have peace of mind knowing the amount is correct.

If you see a letter from the IRS in your mailbox don’t assume you owe money.  Sometimes the agency is seeking additional information such as an error in the entry of a social security number or a missing form.

4.) Arrange payments – even if it is determined that you owe money to the IRS, you don’t have to pay it in full.  With the help of your tax professional you can enter into an installment agreement, allowing you to pay the balance over time, or an “offer-in-compromise” in which the IRS agrees to accept a lower amount.

Time is Running Out to Get Tax Deductions

Looking for ways to get a few last minute tax deductions on your 2017 return?  Here are a few ideas that you can utilize before the end of the year:

Retirement Accounts  

Contributions to your retirement account may be tax deductible.  You may contribute up to $18,000 annually to your 401(k) or 403(b) accounts and up to $5,500 to your traditional IRA.  If you’re over the age of 50 with a 401(k) or 403(b) through an employer, you are eligible for a catch-up contribution.  This allows you to contribute an additional $6,000 to your retirement savings annually for a total of $24,000 in 2017.  You’re also eligible to contribute an additional $1,000 to your own traditional IRA, for a total of $6,500 this year.  Contributions to your retirement accounts can be a great way to save for the future while reducing your tax liability (limitations exist).    

529 Plans  

Do you have someone in your life for whom would like to start a college savings account?  529 Plans can be opened by parents, grandparents, aunts, uncles, family friends or even the student (if over the age of 18).  These savings accounts are like IRAs for college – earnings grow tax free and contributions may be tax deductible.  Even better – if profits are spent on federally approved college costs, you can withdraw from the account tax-free.   

Health Savings Accounts  

A HSA (Health Savings Account) is a great way to help reduce your tax liability while also building savings for medical purposes. In 2017, you can contribute up to $3,400 (self-only coverage) or $6,750 (family coverage) and the money you contribute is pre-tax!  Remember, the money you contribute to your HSA not only cuts your tax bill, but it also rolls over meaning that over time you can amass significant savings for unplanned medical expenses.

Donations  

Don’t forget to donate!  Are spaces in your house full of things like clothing you haven’t worn in years, toys your kids have outgrown, furniture you’ve been dying to get rid of?  Cleaning out your closets, basement, attic, spare bedrooms, etc. and taking those items to a local donation center is a great way to get a deduction!  There are also many services that will pick up your donations from your home.  Just don’t forget to get a receipt and catalog the items you’ve donated.   

Donations are not limited to physical items.   You can also make monetary donations to organizations or your church.  Do you have a retirement account?  Making a contribution from the account to a charity will reduce taxable income from your required minimum distribution.