The IRS and State are notorious for losing things. You may have sent them your W-2s but they lost them. You may have sent your return but they never put it in the system and force-filed you. There have been many “mix-ups” at the IRS but one thing is for sure; if something is missing they are not taking the blame; at least not without a fight. Keeping this in mind, always keep copies of whatever you send them. Always send important items by certified mail and keep good records of dates, times and what you sent.
Along with losing things, the IRS often times doesn’t listen to taxpayers. So always get clarification on anything they tell you and over explain to them what you need. Make their job easy for them and you may wind up with better results.
If you send payments and don’t specify how you want your payments applied, the IRS will almost always apply your payment to the oldest tax on record. Often times they will apply it to taxes that are getting ready to expire! To avoid any confusion we tell our friends and clients to mark on your check which year and type of tax the payment should be applied to. Too many directions are better than none at all.
The burden of proof is on you. The IRS is slowly extending their collection arms further and further. If you were a Maryland resident or had Maryland income associated with back taxes, those never go away. I have clients that have collections from 1985!! The State almost always fails to tell you that they carry a 13% interest rate. Would you leave a large balance on a credit card with 13% interest if you didn’t have to? Not only do they not expire, they can take action by holding your registration, driver’s license, and/or professional license. I am seeing a great increase in the amount of Maryland tax audits for small business owners as well as individuals. Maryland is out of tax season and has moved on to their AUDIT SEASON. If you get flagged for an audit and have lost, misplaced, or can’t recreate satisfactory records to back your returns, the IRS and State will almost always not allow the deduction or credit.
The Importance of Marking Checks Correctly
- If not applied correctly, it can be extremely difficult as well as expensive to go back and try to correct wrongly applied payments.
- It is very time consuming to go back and make corrections.
- The burden of proof is on you!
- Who wants to pay an attorney to go back and review payments credits and let them figure out the the Statute of Limitations?
How and what should you mark on your check
- 1040 or appropriate tax form number
- What year to apply to (they will apply to the oldest year first unless instructed otherwise)
- Your Social Security Number (SSN) or other identifying numbers
- OVER EXPLAINING IS YOUR BEST BET!
The bottom line
Keep your records and important back up documents! The IRS can go back further than you may think. You are not necessarily safe after three (3) years. We are urging clients to hold on to their documents longer than we have in the past. Over explain what you want from the IRS and keep good records of who you speak to and when. If you don’t have an attorney to protect your rights, do your due diligence and help protect yourself.