IRS tax letters don’t go away if you ignore them

If you get tax letters from the IRS or a state, respond to it as quickly as possible. Pretending tax letters don’t exist is not a viable option. It might be a request for information or a notification of taxes due. The letter will generally tell how long you have to respond. If you agree you owe them, just send the money and you’re done.

If you do not respond, they will keep sending tax letters, which will become ominous. As in “We have determined you owe us $8,246.” Or, in extreme cases, notification they will be taking money out of bank accounts or seizing property. This also applies to state tax agencies. The IRS and states have the authority to take money out of any bank account in the U.S for payment of taxes. Some might say, but how can Oregon know about my super-secret bank account in Delaware? Because you have a social security number and because the IRS and states share data, that’s how.

It’s important to remember that if you got a tax form (like a W-2, any 1099, home sale, etc.) then the IRS and state agencies have it too. If you “forgot” to include it in your return, tax authorities will almost certainly eventually find it. Computers are real good at doing this. Then there will be interest and penalties in addition to what is owed.

Always file returns. If you do not file, then the audit can be years later. If you do file, then audits generally have to be done within three years, unless you did something really egregious or criminal.

All of this goes double if you live in or have any business in California. The California Franchise Tax Board has a fearsome reputation and is relentless.

Again, never ignore tax letters.