26 May Managing Notice Volume Increases
Federal tax notices are frozen for much of 2022, but state departments of revenue have been busy sending notices out regularly. While the IRS is struggling with larger mandates, more complex tax laws, and declining budgets. States are not facing the same issues.
In fact, states are way ahead of the IRS in many aspects of tax administration.
While 41 US states require income taxes, 45 states plus the District of Columbia have state sales taxes, and only Alaska has neither. The Internal Revenue Service communicates with each of the states and shares AGI (adjusted gross income) information. This can often trigger state notices for un-filed tax returns. When filing a federal return, it’s vital to check all state information that’s included on 1099 and w-2 forms to stay one step ahead of the notices.
The California Franchise Tax board, for example has 32 different tax notices on its website for individual taxpayers. These notices range from a request for information to a notice of tax lien. Most state tax notices reflect the same priorities as federal notices; gathering information, assessing tax, and collecting money. Taxpayers are given an option to contest these notices, but they should never be ignored. People who move frequently, or don’t open their mail, can be surprised when their refunds get garnished, or liens get put on their home. As with the IRS, most states add interest and penalties for outstanding balances due until they are paid off.
The big advantage in dealing with state notices over federal notices is the prevalence of state online tax accounts.
While dealing with a federal notice could require months of back-and-forth snail mail, or hours waiting for a phone agent. Most state departments of revenue have online options that include emailing departments directly, filing state returns online, and accessing notices and tax information through their online accounts. Phone calls can also be an option, as states are much easier to reach than the IRS these days.
While we all wait for the IRS to get its act together, don’t forget that states are still looking for revenue. They will send out notices to anybody that they think could possibly owe them. Staying on top of these notices and dealing with them promptly is the best way to avoid problems down the road. NOTICENINJA Digital Notice Compliance Platform digitizes and automates management of State, City, and Local notices in addition to IRS notices. NOTICENINJA is the only modern, automated, easy to use Platform delivered as a service solution for Tax and Compliance Professionals. Stay on top of notice volumes with NOTICENINJA SaaS.
To learn more click here to schedule a Live Demo and see how NOTICENINJA is providing simple solutions to complex problems through digital workflow automation.
Article by Dan Connor
Edited by NOTICENINJA