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Have you heard of he IRS's Information Returns Processing System?

Most Massachusetts taxpayers fill out their yearly tax forms, and they make sure they include every dollar of income in order to avoid any adverse repercussions for not doing so. Perhaps it's because they know, or at least suspect, that when it comes to collection taxes, the IRS has many tools at its disposal. One of those tools is the Information Returns Processing System.

This database looks at what a taxpayer reports as income against information received from employers and others such as credit card companies and other financial institutions. These companies are required to report any information they have about the income of clients or customers. If the IRS believes the numbers do not add up, first contact will be made by mail.

The letter will indicate that a discrepancy was found. Some taxpayers choose to pay the amount the agency claims is due, but others may decide to dispute the calculation. This could be an uphill battle, especially if an individual attempts to go through the process alone. The IRS only uses IRP when it suspects that someone underreported his or her income, so the agency has essentially already "convicted" the person of failing to report all income.

It will be up to the taxpayer to prove otherwise. Disproving the allegations of the IRS will require providing evidence that all income was reported, which could be challenging. Taking on an agency that has the power of the federal government behind it often requires some experienced assistance. A Massachusetts taxpayer has the right to consult with legal counsel, and he or she would probably do well to take advantage of it.

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