First, don’t panic!

Relax.

Not all tax notices from the IRS are urgent tax matters; sometimes most of the times, they are simply automated friendly heads up letters.

Does that make you feel better? Good.

Okay. Next, unwrap the package. Determine who it is from. Is it actually from the IRS or from your state tax agency?

You see, all states have tax agencies that handle local tax collections within their jurisdictions. It could be that the mail is from them.

Read what the notice says. Read it thoroughly– from start to finish, front to back and back to front. Understand the content.

Tax notices can be of many types. Some just share important information and don’t require any action. Others communicate actionable recommendations for maintaining compliance. Still others—the dreaded ones—intend to inform business owners about discrepancies found in their tax records.

Below are some examples of notices commonly sent by the IRS and state agencies to small business owners:

By the IRS:

• Underpayment:This arrives when you goof up while filing your taxes, underpaying the actual amount due against your account. Make sure to resolve any such issues in a timely manner.
• Change in deposit schedule: The IRS sets the deposit schedule for every business individually based on their previous deposit amounts. As such, the deposit schedule can be semi-weekly, monthly or quarterly. If the IRS wants to change your deposit schedule, they’ll sent you a letter of notice. Make sure to note down your new schedule to stay compliant.

By state tax agencies:

• Tax rate updates:Local state tax rates are frequently subject to changes. If your state is revising the tax rate, on let’s say state unemployment tax payments, the state tax agency will issue you a letter to inform you about this change.
• Underpayment: Just like the IRS, if you underpaid State Income tax in the past, the agency will send you a notice to inform about the discrepancy.

Should you receive a notice from the IRS, requiring an action, check the notice to see if it specifies any deadline. The standard deadline for most IRS notices is 30 days, however, this may vary. That’s why it’s important to verify.

If you need any kind of help, you can always reach out to the IRS or your business tax services provider.

A BONUS read: Small business advice: Hire your kid and save on taxes!