Picture this scenario: You're out to lunch with a client or customer. On your way back in to the office, you stop and grab the mail. You shuffle through credit card offers, perhaps a bill or two and then it happens. In the upper left hand corner of an envelope, you see this:
You've got a letter from the IRS. It might not be the first time, and it likely won't be the last, but no matter what, the feeling it creates isn't a good one. What you do with this letter can have a legitimate impact on your business. So here are a few tips on how to handle a letter from the good ol' IRS...
While a letter from the IRS isn't usually awesome, you can't panic. Doing so will drive your mind to jump to a series of all sorts of awful conclusions. Instead, take a deep breath. Actually read the letter from start to finish without scanning for scary numbers. Determine exactly what it is the letter is telling you and what action (if any) it is requesting.
Ignoring or simply refusing to believe in the letter's existence is a bad idea. Unless you are positive that the letter requires no action (which can happen), you've got to do something. The IRS doesn't just send friendly hellos, asking how the family is. As mentioned, above identify exactly what action the letter is requesting. Take it a step further and call. Every piece of correspondence from the IRS has a phone number. Gather up the information you'll most likely need (things like your EIN and other incorporation materials) and give them a ring. After what's sure to be a hefty wait time, you'll be able to talk to an agent who can provide additional insight. (Plus, actually talking to someone will do wonders for your psyche.)
Turn to Your Accountant
Your accountant isn't just the person who helps you with tax prep. Assuming they're properly credentialed, they can be a great asset in deciphering a letter from the IRS. They've likely seen hundreds of them! Relay the whole letter to your accountant (even the fine print on the back, if there is any) so that they can get the whole picture. You're accountant also likely has copies of your tax filings (which will be helpful), but just in case, offer to send over previous returns.
Minimize the Likelihood of a Letter from the IRS Entirely
You'll never be able to completely eliminate the chances your business gets a letter from the IRS, but you can significantly reduce the chances. Keeping good, accurate financial records is step number one. Step number two? Be aware of all tax filing deadlines relevant to your business.
Wrapping up, it's worth noting that we (Kashoo) are not in the business of providing tax or legal advice and none of the above should be taken as such. We build accounting software. Your best resource for technical help with tax issues is your accountant, tax professional or lawyer.