The first step is identifying who sent the notice, what type of notice they sent, whether or not any action is required from your part and by when you should be taking said action. Most notices will have a due date to respond or to pay a tax due by so it is very important to open the letter as soon as it is received.
Who sent me the notice?
Sometimes it is hard to differentiate if the IRS has sent you a notice or if it was the state. A good way to check is to look at the top left corner of the your notice and identify which Department of Revenue is writing to you. Another is to read the letter to identify how they are asking you to respond: it could be a phone number, a fax number, or an address. This is another indication of who is writing to you.
What type of notice is it?
- Withholding or Payroll Notice
Since you are a business owner that employs other individuals, your payroll provider files a quarterly return to the IRS and to your State to inform, and pay, employer taxes. A good way to know if it is a payroll notice is to verify if the receiver of the notice is you as an Individual or if it was received to your Business name and EIN. This type of notice will generally have a withholding ID, may reference frequency of filing and will reference a quarter end date (ie March 31, 2022, June 30, 2022, September 30, 2022 or December 31, 2022).
If you have identified it is a payroll notice, you may send this over to your payroll provider who will be able to assist identifying next steps.
- Income Tax Notice
An Income Tax Notice will come to you and your spouse's, if applicable, name and SSN. These notices will state that they are an adjustment to your "Income tax" owed for an applicable period (ie December 31, 2021).
You may need to respond to your state by a certain date if you do not agree with changes they are making to your return. They will provide information on how they want you respond to them: it may be a phone call or a letter that needs to be mailed out but they may also provide a fax number which is likely the easiest way to respond.
If you agree with the changes the notice is proposing, you may need to pay an amount due if applicable or wait to receive a refund and no other response would be required on your behalf.
You can send this notice to firstname.lastname@example.org to make sure that we can document that there have been changes assessed to the taxes we filed on your behalf. We will also be able to identify what next steps are needed from you, if any, to solve the notice.
Common reasons for an Income Tax Notice
- Changes were made to your Federal Tax Return and now you owe more state taxes or are eligible for a refund.
- Incorrect reporting of estimated taxes paid:
- They may issue a refund if you forgot that you paid more during the year or,
- They may claim that you did not make an estimated tax payment that was reported as paid in your tax return.
- They may require more information in order to determine your applicability to claimed credits.