Last week, some of our clients and other tax professionals have been sharing with us some of their notices received from different tax authorities. As we always recommend, please, review it carefully as it might be sent by error as more and more tax departments are relying on a) IT criteria, b) outstanding balance without tax deadline dates, etc. Just a few examples received this week are:

  1. Notices from IRS to one taxpayer – One notice where the taxpayer owes $16k ($15k principal and $1k interest – Feb 2024 – LT38). Then, a subsequent notice (March 2024 – CP32A) indicates that her check for $15k has not been deposited and that the check expired. Yes, you read right, the IRS never paid the taxpayer and now it is asking for that principal back and interest. As you can imagine, this requires a call to the IRS, either from the client or the tax professional with a Power of Attorney PoA, to reconcile their internal data.
  2. Notice from State – One practitioner posted on a CPA State board certain issues that many practitioners have been facing with an increase of notices on simple w2 refunds (which means that the State has already that w2 information to release the amount overpaid by the taxpayer) and the response was that there was an error on the criteria selected for those notices, specifically ” … Division of Taxation has always made an effort to validate income and withholdings, however, an issue with the criteria caused an increase to the number of notices issued.”
  3. Notice from Local authority – Some clients received letters of outstanding balances before the taxes were due. When raised to the Revenue Department, their response was “... A system fix was put in place to prevent future Taxpayer Account Statements from being issued prior to the due date for period.” so thousands of notices were sent to taxpayers asking for amounts that were not due until a few weeks months later, and where ACH payment were already scheduled.
  4. Notice from IRS to taxpayer – This last one was an appropriate notice of adjustment by the IRS CP24 where the IRS provided a lower refund to the taxpayer and in the notice the IRS stated ” Our records show that you didn’t make estimated tax payments”. While the IRS notice was not accurate as the taxpayer made estimated tax payments for $35k, the taxpayer confirmed to us that the estimated tax payments were for $60k so the IRS was correct on reducing the tax refund (or roll over in some cases) for $25k as it was not paid to the IRS.

As mentioned in our posts, if you get a notice, review the notice in detail (all pages) and then, address any request items and reply either in writing, fax, email or give the tax authority a call. You can get help from your tax professional, but make sure a PoA is on file or execute one to give authorization to act on your behalf.