Why Did I Receive a Verification Letter From the IRS?

Receiving a verification letter from the IRS can be an unexpected and concerning experience for taxpayers. This correspondence, often related to confirming identity or verifying information on tax returns, helps maintain the integrity of the tax system.

Reasons for the Verification Letter

The IRS issues verification letters to ensure the accuracy and legitimacy of tax filings. A common reason is discrepancies between the information reported on a taxpayer’s return and data from third-party sources, such as employers or financial institutions. For instance, if a taxpayer reports income that does not match the W-2 forms submitted by their employer, the IRS may send a verification letter to resolve the inconsistency. This process ensures taxpayers report their income correctly.

Another reason is the IRS’s efforts to combat identity theft and fraudulent tax filings. If the IRS suspects a return may have been filed by someone other than the legitimate taxpayer, they issue a verification letter to confirm the taxpayer’s identity before processing the return. This step helps prevent fraudulent refunds and protects taxpayer information.

Verification letters may also be sent when a taxpayer claims credits or deductions that require additional documentation. For example, claiming the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC) often necessitates further verification to ensure eligibility. The IRS may request supporting documents to substantiate these claims.

How to Respond

Receiving a verification letter from the IRS requires a prompt and informed response. The IRS provides several avenues for responding, each with its own procedures.

Online

Responding online is often the most convenient method. The IRS offers an “Identity Verification Service” tool on their official website. Taxpayers need their verification letter, as it contains a unique letter number required for the process. They should also provide personal information, such as their Social Security Number, filing status, and prior year tax return details. Ensure the website is legitimate by checking for the “.gov” domain to avoid phishing scams.

By Phone

For those who prefer a personal approach, responding by phone is another option. The IRS provides a dedicated phone number on the verification letter. Taxpayers should have relevant documents ready, including the verification letter, prior year tax returns, and supporting documentation for the current tax year. The representative will guide them through the verification process, which may involve answering security questions. This method might require patience due to potential wait times, especially during peak tax season.

In Person

Taxpayers with complex issues or those who prefer face-to-face interaction can visit a local IRS office. Appointments are required and can be scheduled through the IRS website or by phone. Taxpayers should bring the verification letter, a government-issued photo ID, and relevant tax documents. This method allows for direct communication, which can be helpful for resolving intricate issues or providing extensive documentation.

Documents You May Need

Preparing the appropriate documents is crucial for a smooth resolution. The specific documents depend on the nature of the inquiry and the details requested by the IRS.

Taxpayers should gather recent tax returns, including supporting schedules and forms. For instance, if the inquiry pertains to income discrepancies, having copies of W-2s, 1099s, or other income statements will be beneficial. If the issue involves deductions or credits, such as the Child and Dependent Care Credit, relevant receipts, invoices, or statements should be organized.

Identity verification documents are often required, particularly in cases of suspected identity theft or fraud. These typically include a government-issued photo ID, such as a driver’s license or passport, and may also require a Social Security card or birth certificate. If proof of residency is needed, utility bills, lease agreements, or mortgage statements may be necessary.

For specific tax credits or deductions, additional documentation may be requested. For example, taxpayers claiming education-related credits might need to provide Form 1098-T from their educational institution and receipts for tuition payments. Similarly, claims involving health-related deductions may require medical expense statements, insurance documentation, or prescriptions.

Potential Processing Delays

Processing delays can occur due to various factors. One common cause is the large volume of correspondence the IRS handles, especially during peak tax season. This influx can lead to longer processing times, as submissions are prioritized based on complexity and urgency.

The complexity of the issues addressed in the verification letter can also contribute to delays. Inquiries involving intricate tax credits or deductions may require extra scrutiny and thorough review of supporting documentation to ensure compliance with tax laws.

Consequences of Ignoring the Letter

Failing to respond to an IRS verification letter can lead to significant repercussions. The IRS may suspend processing your tax return, and no refunds or credits will be issued until the matter is resolved.

Ignoring the letter could escalate the situation. The IRS may adjust your filing unilaterally, resulting in the denial of claimed credits or deductions and potentially increasing your tax liability. For instance, if you claimed the Earned Income Tax Credit (EITC) but failed to provide requested documentation, the IRS may disallow the credit, leading to penalties and interest on the unpaid balance.

Long-term consequences may include heightened scrutiny of future tax filings and an increased likelihood of audits or further correspondence. Unresolved issues can also lead to a Notice of Deficiency, allowing the IRS to assess taxes owed.