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How Changing the IRS Notice Color Could Allay Fears

Anyone who has received an IRS notice knows all too well the feeling of fear and dread, even though they may have done nothing wrong! A recent article by Don’t Mess with Taxes author Kay Bell titled: “A Colorful Way to Ease IRS Notice Fearsshines a bright spotlight on how an unopened IRS notice can evoke panic and how some people think that should change.

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Bell begins her post by relating her experience where she received two separate IRS notices; a correspondence audit and a tax refund. The explanatory letter that arrived a few days after her refund check indicated that she had used the wrong tax table figure and was therefore entitled to the hundreds of dollars the IRS refunded.

As for the correspondence audit, some investment income had been overlooked on a previous return. Therefore, Bell did indeed owe Uncle Sam a bit more tax, plus an IRS penalty and interest.

What’s most interesting was Bell’s visceral reaction to both notices or as she describes it “[her] heart rate immediately jumped to Olympic sprinter pace.” By no means is Bell alone in her experience. She cites a letter by Adam Chodorow, a professor at Arizona State’s Sandra Day O’Connor College of Law and tax panicker, to Tax Analysts explaining his idea of how to ease such tax correspondence induced panic attacks.

Chodorow suggests color-coding the IRS envelopes so that taxpayers will immediately know the amount of tax trouble they are in. The following is the color code for IRS correspondence that Chodorow came up with that could conceivably abate taxpayer stress.

  • Green envelope, according to Chodorow would signify low risk correspondence such as an inquiry about another taxpayer or perhaps a refund.
  • Blue could indicate a simple query, perhaps about an inadvertent failure to report some minimal income amount.
  • Yellow might indicate a more significant audit letter.
  • Orange might signify an office audit that might equal $10,000.
  • A Red notice means big problems or as Chodorow puts it “you’re screwed.”

This is an interesting topic to ponder because it could have the potential to help people be less afraid to open their mail, read the letter and take the proper action. Nevertheless, given the deep seated fear of the IRS notice, it seems that no matter what color the envelope, taxpayers will still be afraid of the tax man – no matter what.

If you are avoiding the IRS because you have tax issues that you are afraid of, don’t wait for a colored envelope to arrive before you take action.

If you owe more than $10,000 in back taxes, have received an audit letter or are under audit, you need to hire a certified tax resolution specialist who is accustomed to dealing with the IRS. This tax pro can properly organize your records and help negotiate an IRS payment plan so your IRS problems become a thing of the past.

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