If you’ve found yourself facing unexpected or incorrect charges from the IRS, don’t panic. The key to successfully disputing them lies in understanding your rights, gathering solid documentation, and following the proper procedures. This guide walks you through the steps to take, explains the forms you might need, and shares my personal experience in resolving a similar situation.
Disputing IRS Charges: A Step-by-Step Guide
The following steps will help you navigate the process of disputing IRS charges:
Identify the Charge and Research: First, pinpoint the specific charge you’re disputing. Access your IRS account transcript online or request a copy by mail. Understand what the charge is for – is it a penalty, interest, or an assessment of additional tax? The IRS usually provides a notice explaining the charge, which you should examine carefully. Try to recall the tax event the charge relates to, and gather supporting documentation.
Determine the Reason for the Dispute: Why do you believe the charge is incorrect? Common reasons include:
- Error in Calculation: The IRS made a mistake in calculating the tax or penalty.
- Paid Already: You already paid the tax, penalty, or interest.
- Incorrect Assessment: The IRS assessed tax based on incorrect information.
- Identity Theft: Someone fraudulently used your identity to file a return.
- Reasonable Cause: You had a valid reason for not filing or paying on time. This could be illness, natural disaster, or other unavoidable circumstances.
Gather Supporting Documentation: This is critical. The more evidence you provide, the stronger your case. Here are some examples:
- Proof of Payment: Canceled checks, bank statements, credit card statements, or money order receipts.
- Amended Returns: If you filed an amended return, provide a copy.
- Tax Returns: Copies of the original tax returns in question.
- Medical Records: If claiming reasonable cause due to illness.
- Insurance Claims: If claiming reasonable cause due to natural disaster.
- Correspondence with the IRS: Copies of any letters or notices you’ve received from the IRS.
- Business Records: Any relevant business records if the charge relates to business taxes.
- Affidavits: Sworn statements from witnesses, if applicable.
Contact the IRS: Before filing a formal dispute, consider contacting the IRS directly. You can call the number on the notice you received or visit a Taxpayer Assistance Center. Explain your situation and see if they can resolve the issue quickly. Sometimes, a simple phone call can clear things up. Keep detailed records of your calls, including the date, time, name of the IRS representative, and a summary of the conversation.
File a Formal Dispute: If contacting the IRS doesn’t resolve the issue, you’ll need to file a formal dispute. There are several ways to do this, depending on the nature of the charge:
- Notice of Deficiency: If you disagree with a proposed tax assessment, you have the right to petition the U.S. Tax Court. You typically have 90 days (or 150 days if you’re outside the U.S.) from the date of the notice to file a petition. This is a more complex process and usually requires legal representation.
- Request for Abatement: If you believe a penalty or interest charge is unwarranted, you can file Form 843, Claim for Refund and Request for Abatement. Explain why you believe the charge is incorrect and include supporting documentation.
- Offer in Compromise (OIC): This is a settlement agreement where you offer to pay the IRS a lesser amount than you owe. This is typically used when you’re experiencing financial hardship and can’t afford to pay the full amount. You’ll need to file Form 656, Offer in Compromise.
- Innocent Spouse Relief: If your spouse or former spouse improperly reported items on your joint return, you may be eligible for innocent spouse relief. This can relieve you of responsibility for paying the tax, interest, and penalties. You’ll need to file Form 8857, Request for Innocent Spouse Relief.
Document Everything: Keep copies of all correspondence, forms, and supporting documents you send to the IRS. Send everything by certified mail with return receipt requested to have proof of delivery.
Follow Up: The IRS can be slow to respond. If you don’t hear back within a reasonable time (typically 30-60 days), follow up with a phone call or letter. Be polite but persistent.
Consider Professional Help: If the dispute is complex or involves a significant amount of money, consider hiring a tax professional (CPA, Enrolled Agent, or Tax Attorney). They can provide expert guidance and represent you before the IRS.
Forms You Might Need
| Form Number | Description | Purpose |
|---|---|---|
| Form 843 | Claim for Refund and Request for Abatement | To request a refund or abatement of penalties or interest. |
| Form 656 | Offer in Compromise | To propose a settlement agreement to the IRS to pay a lesser amount than you owe. |
| Form 8857 | Request for Innocent Spouse Relief | To request relief from tax, penalties, and interest due to the errors of your spouse or former spouse on a joint tax return. |
| Form 911 | Request for Taxpayer Advocate Service Assistance (TAS) | To request assistance from the Taxpayer Advocate Service if you’re experiencing significant hardship or difficulty resolving an IRS issue. |
My Experience & Quick Fix
My Experience & Quick Fix
In my case, the erroneous charge was a penalty for underpayment of estimated taxes. I diligently pay my estimated taxes quarterly, so this was immediately suspicious.
What happened: After checking my records, I realized the IRS had somehow misapplied one of my quarterly payments to the wrong tax year. It was a large payment, so the penalty was substantial.
My Quick Fix:
- Gathered Proof: I compiled copies of my bank statements showing the electronic transfers to the IRS for each quarterly payment.
- Called the IRS: I spent what felt like an eternity on hold, but finally got through to a representative. I explained the situation and provided the dates and amounts of my payments.
- Faxed Documentation: The representative instructed me to fax my bank statements to a specific IRS fax number.
- Followed Up Relentlessly: I followed up by phone every week for a month. Each time, I re-explained the situation and confirmed they had received my documentation.
- Victory! Finally, after what felt like an endless wait, the penalty was removed from my account. The representative confirmed that the payment had been correctly applied.
Key takeaway: Persistence is key. Don’t give up, and keep following up until the issue is resolved. Document everything.
Additional Tips
- Taxpayer Advocate Service (TAS): If you’re experiencing significant hardship or difficulty resolving an issue with the IRS, consider contacting the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that helps taxpayers resolve problems with the IRS. You can contact TAS by calling 1-877-777-4778 or visiting their website.
- Statute of Limitations: Be aware of the statute of limitations for assessing and collecting taxes. The IRS generally has three years from the date you filed your return to assess additional tax. There’s also a statute of limitations on when you can file a claim for refund.
- Reasonable Cause Assistance: If you believe you have reasonable cause for failing to file or pay on time, gather as much documentation as possible to support your claim. The IRS will consider the facts and circumstances of your situation when determining whether to grant relief.
- Watch out for Scams: Be very wary of scammers posing as IRS agents. The IRS will never demand immediate payment over the phone or threaten you with arrest. If you receive a suspicious call or email, don’t give out any personal information and report it to the IRS.
- Keep your Data Safe: When sending sensitive information to the IRS, encrypt documents when possible or mail physical copies using registered mail.
Conclusion
Disputing IRS charges can be a frustrating experience, but it’s important to remember that you have rights as a taxpayer. By understanding the process, gathering solid documentation, and being persistent, you can successfully resolve the issue. Don’t hesitate to seek professional help if you need it. And, trust me, learn from my experience – keep meticulous records of everything related to your taxes! Good luck!
Frequently Asked Questions
What is the first step in disputing an IRS charge?
The first step is to identify the specific charge you’re disputing. Access your IRS account transcript online or request a copy by mail and understand what the charge is for.
What form do I use to request abatement of penalties or interest?
You can file Form 843, Claim for Refund and Request for Abatement, if you believe a penalty or interest charge is unwarranted. Explain why you believe the charge is incorrect and include supporting documentation.
What is the Taxpayer Advocate Service (TAS)?
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers resolve problems with the IRS. You can contact TAS if you’re experiencing significant hardship or difficulty resolving an IRS issue.
What should I do if I suspect an IRS scam?
Be very wary of scammers posing as IRS agents. The IRS will never demand immediate payment over the phone or threaten you with arrest. If you receive a suspicious call or email, don’t give out any personal information and report it to the IRS.