Tax Records: How to Dispute an IRS Notice – Part 1 of 2

September 22, 2013 by Tracy

Photograph Credit: Microsoft Images

When I think of taxes and the IRS, I get a bit nervous. I get a knot in my stomach every year before clicking that submit button when electronic filing our tax returns. So, when we received an IRS notice in March of 2012 indicating a $1500 error, I immediately felt sick.

Thoughts that went through my mind were how could I have missed such a huge amount, payment would need to come from our emergency fund, and why did it take over a year to notice the error.

In retrospect, I should have just relaxed and gone to my documentation. Please learn from my experience by accepting the notice and dealing with it in an organized manner.

The evening I received the notice, I waited until the kids were in bed to concentrate on understanding and working through the information. Dealing with the issue quickly helped put my mind at ease and clear the air well before the deadline. I share how to dispute an IRS notice to calm you should you also receive a notice.

Part 1: Preparing your Case

These are tips that I found helped me – as dealing with the IRS is one of the top items on my I’D RATHER BE DOING ANYTHING OTHER THAN THIS list. 🙂

1. Gather your Tax Documents

Keeping our tax returns in our important documents file, I went to the 11^th file opening and retrieved our 2010 federal tax return.

2. Choose a Quiet, Non-interrupted Space

Waiting until my children went to bed gave me a chunk of time at my desk without interruption in which to work.

3. Take a Deep Breath

Giving myself a moment to collect myself, clear my head, and focus on the task at hand, I took a series of deep breaths before looking at the notice.

4. Read the Notice in Full

Our notice was 12 pages in length. Of course, some of it was in legal terms, but I worked my way through the information.

5. Identify the Line Item Issue

For us, the notice issue was when we converted our Traditional IRA to a Roth IRA. We took advantage of the tax code loop hole and chose to defer paying taxes on the total amount until 2011 and 2012. Since Paul and I both converted, the IRS was asking for the total tax from both our accounts in 2010.

6. Prove your Choice

I went back to our tax return to find our nondeductible IRA forms and confirmed that these were filed electronically with our tax return.

7. Organize your Proof

With the documentation collected and realizing that we had filed correctly, I put all the paperwork in the order I needed to contact the IRS.

As I prepared my case, I became more confident realizing that the IRS made a mistake. I relaxed knowing that our family would not need to pay the $1500 amount indicated as half of the tax was claimed on our previously filed 2011 tax return and the other half would be claimed on our 2012 return.

Dealing with the IRS is not a walk in the park but by keeping our documents and confirmations of actions taken, I had proof to prepare my case. The second part of this short series will share how I addressed the notice with the IRS.

If you receive a notice from the IRS, then gather your tax documents, choose a quiet, non-interrupted space, take a deep breath, read the notice in full, identify the line item issue, prove your case, and organize your proof. With your case prepared, you will have a better understanding of your situation when dealing with the IRS. Happy preparing!

Question: Have you ever received an IRS notice?

Credit Report: Disputing Errors

April 3, 2011 by Tracy

Photograph Credit: Microsoft Images

Did you find any errors on your credit report? If not, then great! You can file your report away. But if you found errors, then locate the dispute form, the credit bureau’s website, or the bureau’s phone number.

I prefer to dispute in writing. I include a copy of my report with the problems clearly marked. I also fill out the dispute form entirely. If a section does not apply, then I draw a line through it. If there is not enough room on the dispute form, then I write out any remaining errors noting the specific incorrect information and replacing it with the correct information.

This process is time-consuming. First, I make copies of the report, the dispute form, and any additional documentation. Then I mail the forms to the credit bureau and wait for their investigation results. When the credit bureau has finished processing your disputes, they mail me a revised copy of my credit report. YOU ARE NOT CHARGED FOR THIS REPORT.

Once I receive the revised report, I start again. I review it for errors. If I find additional errors, then I get the dispute form, and write out the errors still reporting on my credit report.

Usually all discrepancies are cleared up after the second dispute submission. The key is to stay organized, follow directions, and be persistent. If I do not get complete reconciliation by the second request, then I would call the credit bureau and speak to a customer service representative.

TIP: Remember that your dispute appeal is time sensitive. You have 90 days from the date of issuance to dispute your information. Yes, 3 months seems like quite a bit of time, but if you procrastinate, you will miss the window to submit your dispute.

I am extremely persistent. I will not allow the credit bureau to continue to report incorrect information. This information may be needed sooner than I anticipate, so I want my information to be reported perfectly! I take great care to protect our identities, and I expect the credit bureaus, responsible for that information, to report it accurately!

Credit Report: Reviewing Information

March 27, 2011 by Tracy

Photograph Credit: Microsoft Images

Do you have your credit report? Have you had a chance to review it? If so, do you know for what you are looking?

Each of the three credit bureaus has a slightly different format, but the information is the same. When I read through my credit report, I am looking for the following:

1. My name is correct. Suze Orman recommends in her Protection Portfolio using your full name, including spelling out your middle name, on all documentation to prevent identity theft and confusion.

2. The payment history legend. These symbols will let me know how the bureau is reporting my payment history.

3. Accurate credit accounts. I look at each account and identify the creditor and the type of credit (i.e. revolving, auto, installment, mortgage, etc.). If any of the information is incorrect, I will mark it for ease in locating it later.

4. Accurate reporting of credit limits and balances. I make sure what is listed matches my own records. If not, then mark it for later.

5. Correct Status and Comments. If the account is closed, then I am looking under the comment section for “account closed at consumer’s request.” I make sure this comment is on each of my closed accounts. I never want a creditor to assume that the account was closed by the lender.

TIP: Closed accounts report negatively on your credit due to lowering your overall credit limit available, the overall time you have accounts in good standing, and usually your credit to debt ratio (meaning you have less available credit when you close that account).

Though the credit agencies see a closed account as a negative, I still close accounts that Paul and I deem necessary for our financial future. For example, our Master Card with an $11,000 credit limit was going to be charged an annual fee of $75 per year. Paul and I decided to opt out of the new agreement, and closed our account at the consumer’s request.

Our debt to credit ratio was affected, but our credit score only dropped one point. This drop was worth the savings in our pocket.

6. Up-to-date information on payment history. I want to be sure that all accounts are reported as current. If you were late on a payment, be sure it was reported accurately. If you see a problem, then flag it for later.

7. Browse the list of companies that have requested my credit history. If I don’t recognize a company, then flag it for later.

8. Check inquiries that affect your credit score. Be sure you gave approval to have your credit checked. If not, then mark it.

9. Look for inaccurate reporting of your personal information. Mark anything that is incorrect, especially addresses.

Did you find any discrepancies? I remember all the errors I found the first time I pulled our credit reports. I was busy for weeks getting all the errors investigated and corrected. If you marked the errors, then the next step is disputing those errors with the credit bureau. I will help you dispute the errors next week.