The North Carolina Department of Revenue sent out notices to nearly 2,000 taxpayers on March 2nd stating that they owed state taxes for 2008, when they actually did not owe any additional taxes. The error is limited to those taxpayers who claimed the standard deduction in 2008 and who increased their deduction for property taxes or loss after a federal disaster.

The Department of Revenue claims that the notices were sent after the Internal Revenue Service provided them with inaccurate data about federal taxable income on some returns.

This isn’t the first time that inaccurate notices have been sent out. Just last year South Carolina taxpayers were bombarded with notices stating that they owed taxes plus a $1,000 penalty on business withholding accounts that were previously closed.

Remember, just because your states department of revenue sends you a notice that claims you owe them money, it does not necessarily mean that you owe them money!

Contact your tax professional to get the situation cleared up. If you received a notice, refer to Donna’s previously blog entitled “What do you do with IRS notices?”

Yikes, you open the mail today, and there is a dreaded envelope from the IRS.  Heaven forbid, it arrives via certified mail.  There are three possible responses that you can choose: 

1. don’t open it and stuff it in the drawer;
2. get on the phone to the IRS as soon as I can get the envelope open;
3. fax it to my CPA and go on with my day.

If you answered #1, you must be our friend, Mr. or Mrs. Procrastinator.  It won’t go away or evaporate and the IRS will just keep sending letters.  You may even run out of time to protest their results even if they are incorrect.  And oh no, did you prepare the return yourself too?  Do yourself a favor — find a qualified CPA that you can count on and talk to them or better yet, call me.

If you answered #2, you will are probably frustrated to no end and rightfully so.  The IRS has two sets of phone lines — one for taxpayers and one for practitioners.  Can you guess where they put their slower less experienced staff?  I don’t even need to answer that one.  I have had clients call the 800-829-1040 number and get the biggest load of bull I have ever heard.  One was told the IRS had to receive her extension by April 15, and the postmark date did not matter.  My client believed them until I told them otherwise.  The representatives on the practitioner line are typically more knowledgeable and able to get things faster and easier and you won’t need to waste your time.  Lower your blood pressure and talk with your CPA. 

If your answer was not number 3, why not?  IRS notices are confusing and written in another language at times.  Sometimes they are right and sometimes they are wrong.  If a CPA prepares your return, ask them if they will answer notices for you.  Our firm’s most popular package for tax preparation includes responding to notices.  Relieve your stress and high blood pressure, use your CPA’s expertise.