Love Letter from the IRS? Don’t Panic!

Are you one of the lucky tens of thousands of American taxpayers who received a letter in error from the IRS?  If so, don’t panic!  According to Richard Neal (House Ways and Means Committee chairman, D-Mass), there were roughly 12 million pieces of unopened mail in IRS offices across the country.  This was the result of many IRS workers working from home during the pandemic.  In those enormous piles of mail are paper tax returns, correspondence, and (you guessed it!) tax payments.

The IRS has started sending out letters to address unpaid balances.  The problem is that many of those tax payments were mailed, they just remain unopened.  As taxpayers receive these letters, they panic.  However, there is no need to panic!  If you mailed a check to the IRS the first thing you should do is check your bank account.  Has the payment cleared?  If not, then there is nothing for you to do but wait.  Clarification letters are being sent out as payments are processed.  If your check has cleared and you still received the letter, we recommend calling the IRS to discuss the payment with a representative.  It may be a clerical error or the letter may have been sent before the payment was processed.

Have you received a letter from the GA Department of Revenue or another state’s taxing authority?  The first step is to call and request an explanation of the penalty.  There are two likely causes:

  1. Your payment was received after the typical April 15th deadline but before the July 15th deadline.  If the state’s system was not updated to recognize the new filing deadline this year, you may have been assessed a penalty even though your payment was not late.
  2. You had a sizeable balance due and are being penalized for failure to make estimated payments.

Why would you be penalized for not making estimated payments?  Remember that our tax system is a pay-as-you go system meaning tax is due when it is earned.  This is why W-2 employees have taxes withheld from each paycheck.  If your balance due at filing is greater than $1,000, both the IRS and state taxing authorities reserve the right to calculate a penalty for failure to make estimated payments.  For more information on estimated payments, check out our previous blog post.

Were you owed a refund that you have not yet received?  The IRS has announced that it will pay refund interest on any return filed before the July 15th deadline and that interest will be calculated from April 15th.