If you’re in business, it’s bound to happen to you at some point. We’re talking about a crisp piece of mail from the IRS.
While letters like these can come at any time throughout the year -- and throughout your career -- they tend to tick up right about now. And though many mailings can be harmless, for the rookie entrepreneur they're no less frightening. They’re also not the easiest things to read and have been known to leave recipients scratching their heads. Still, you must do something.
Ignoring mail from the taxman is never a smart move -- he’s got all the time in the world. So below are a few tips you can implement immediately should you ever experience the joy of having to open a letter from the IRS:
First, take a deep breath
Receiving a letter from the IRS isn’t the end of the world, so take a deep breath. Actually, take two. Good. Now read the letter from start to finish. Don’t jump around as the IRS tends to lay things out in an orderly, albeit jargon-filled, fashion. Then read the letter again. Your objective at this stage is to understand as much of the situation as possible and identify what’s being asked of you and what your options are. And it can’t hurt to gather potentially useful documentation such as old returns.
Every piece of mail from the IRS comes with a phone number. Assuming the letter you’ve received doesn’t paint the whole picture for you, calling this number will be well worth it as talking to a person not only helps you understand the nuances of the situation but there’s comfort in knowing that a human being with a name and a face at the IRS is there to help you figure things out.
Bonus tip: note the operating hours and avoid calling first thing in the morning or during lunch when the lines are busiest. Bonus, bonus tip: maybe now’s the time to invest in a hands-free headset because you might find yourself on hold for some serious lengths of time.
Consult some help
If you have an accountant, you should immediately send them a copy of the letter. (If you don’t have an accountant, now might be the time to get to know one.) Send a copy and request some time to discuss. The meter will most likely be running, but it will be time and money well spent as your accountant has the experience and insight you’ll need. Some accountants will offer to handle the inquiry for you (at a cost) and interact directly with the IRS or they will further explain the situation and get you started on what actions you need to take. Either way, think of an accountant as an ally who knows how to deal with the IRS and has likely seen your situation before.
Keep good records and adhere to deadlines
Of course, the best way to prepare for that inevitable letter from the IRS is to keep meticulous records and adhere to deadlines. Keep digital copies of all tax payments. If you have an accountant, check in with her on a monthly basis so that nothing gets lost in the shuffle. Know when quarterly estimated tax payments are due.
Ultimately, it comes down to being prepared. A letter from the IRS is anxiety-inducing enough as it is -- having to wade through mountains of disorganized documentation is only going to compound your panic.
And don’t forget those deep breaths.