Why these letters matter

IRS demand letters are not marketing mail — they are legal communications that often start the clock on collection, appeal, or administrative processes. Ignoring a legitimate IRS notice can lead to mounting interest, penalties, wage garnishment, bank levies, or a federal tax lien. Conversely, a timely, well-documented response frequently resolves issues with little or no additional cost.

In my practice advising individuals and small businesses, timely recognition and the correct next step—whether it’s verifying a math error, requesting an installment agreement, or submitting records to stop an audit—has prevented many clients from escalating into more severe collection actions.

How to identify and verify a legitimate IRS demand letter

  1. Read the top and the notice number. Every official IRS letter includes a notice or publication number (for example, CP or LT series). The letter should show the tax year, amount due, and how it was calculated. The response deadline will be printed on the letter.
  2. Check contact details and instructions. The IRS primarily communicates by mail. The letter will include instructions for how to respond: pay online, call the number shown, or mail supporting documents.
  3. Verify via the IRS website or your online account. If you doubt legitimacy, compare the notice number and instructions with the IRS page “Understanding IRS Letters and Notices” (irs.gov) or sign into your IRS Online Account at IRS.gov. The IRS also publishes examples and explanations of common notices (see irs.gov/understanding-your-notice).
  4. Beware of scams. The IRS will not demand immediate payment via gift cards or threaten arrest in the initial mail. If you received a threatening phone call or suspicious email or text, see the IRS guidance on scams at irs.gov/newsroom/tax-scams-consumer-alerts.

Typical timelines and what they mean (practical view)

  • Standard response window: Many IRS demand letters give a 30-day response period. Within 30 days you can usually pay, explain, or request an appeal or collection alternative.
  • Shorter timelines: Some notices may set shorter times for document submission or for scheduling appointments—always read the exact date on the letter.
  • Series of escalating notices: The IRS uses a sequence of notices for unpaid balances (reminders, final notice, and then levy action). You might receive monthly notices before enforcement, but the Final Notice of Intent to Levy typically gives a taxpayer 30 days to respond or request a Collection Due Process (CDP) hearing before levy.
  • Audit and information letters: Requests for additional documentation generally include specific deadlines (commonly 30 days) and will state whether failure to respond triggers an audit adjustment.

Note: Timelines and the right appeals process are printed on the notice and governed by statute and IRS procedure—use the letter as your primary source and confirm with IRS.gov.

Step-by-step checklist: How to respond when you get a demand letter

  1. Stay calm and read carefully. Note the notice number, tax year, amount claimed, due date, and response options.
  2. Compare with your records. Pull the return for the year in question, bank statements, W-2s/1099s, and any supporting documents cited in the letter.
  3. Look for obvious math or identity errors. If the IRS adjusted your return because of missing income documents or arithmetic errors, verify whether the adjustment is correct.
  4. Prepare a concise written response. A short cover letter that references the notice number and attaches supporting documents works best. Keep copies of everything you send.
  5. Choose the right remedy:
  • Pay in full if you can. The IRS provides payment options online (Direct Pay, Electronic Federal Tax Payment System, debit/credit) and by mail. Paying clears the issue fastest but may not be best if you need cash for living expenses.
  • Ask for an installment agreement if you cannot pay immediately. The IRS offers several installment agreement types; see our guide on Setting Up an IRS Installment Agreement for step-by-step help (https://finhelp.io/glossary/setting-up-an-irs-installment-agreement/).
  • Consider an Offer in Compromise if you cannot pay the full liability and meet qualifying tests (see Offer in Compromise Process on FinHelp for documentation and valuation tips).
  • Request an appeal or Collection Due Process hearing if your letter is a Final Notice of Intent to Levy. You generally have 30 days to request a CDP hearing to bar levy and pursue collection alternatives.
  1. If needed, contact a professional. A CPA, enrolled agent, or tax attorney can prepare responses or negotiate with the IRS on your behalf.
  2. Use the Taxpayer Advocate Service (TAS) if you face economic hardship or the IRS is not responding fairly. TAS is independent within the IRS and can help resolve problems when normal channels fail.

Document what you send and how you send it

  • Keep dated copies of everything. Save certified mail receipts, fax confirmations, and notes from phone calls (date, time, name/ID of IRS agent, summary of discussion).
  • Use certified mail or the method the notice recommends when sending proof. If you send documents online through an authorized representative or secure IRS portal, save confirmation records.

Options when you can’t pay immediately

  • Installment Agreement: The IRS allows monthly payments for many taxpayers. Some streamlined agreements are available without filing Form 433-F depending on the balance and circumstances. See our detailed guide: Setting Up an IRS Installment Agreement.
  • Partial Payment Installment Agreement (PPIA): For taxpayers who cannot pay the full amount but can pay something, the IRS accepts partial-payment agreements in many cases—qualification and documentation are important.
  • Offer in Compromise (OIC): If you genuinely cannot pay the full tax debt, an OIC might settle the debt for less than the full balance after IRS review. Use an OIC only after careful analysis; see FinHelp resources on the Offer in Compromise Process and related application tips.
  • Currently Not Collectible (CNC) status: If paying anything would create undue hardship, CNC temporarily suspends collection while interest and penalties still accrue.

(For deeper guidance: our pages on Offer in Compromise Process and Options When the IRS Files a Notice of Federal Tax Lien explain alternative outcomes and documentation requirements.)

Common pitfalls and how to avoid them

  • Ignoring the letter. This is the most costly mistake. Even if you disagree, file an appeal or request a hearing within the deadline.
  • Over-responding emotionally. Keep responses factual and documentation-focused.
  • Failing to follow the instructions on where and how to send documents. Use the address or online channel specified on the notice to ensure timely processing.
  • Hiring a bad actor. If someone guarantees an OIC without reviewing your finances or asks for large upfront fees, pause and check credentials. Verify representatives with IRS records and the Directory of Federal Tax Return Preparers.

How to spot and handle scams

  • The IRS initiates contact by mail, not by phone, text, or email, for first notices. If you are contacted by phone or email demanding immediate payment with threats, research the IRS scam alerts page and report the incident.
  • Confirm by logging into your IRS Online Account or calling the IRS using a number from irs.gov. Do not call numbers provided in suspicious emails.

When to involve the Taxpayer Advocate Service

If you’ve tried normal channels and the IRS hasn’t resolved your case, or if collection action would cause immediate financial harm, TAS can open a case to expedite resolution. The Taxpayer Advocate Service also helps with systemic issues and protects taxpayer rights.

A few practical examples from practice

  • Example 1: A client received a demand letter showing unreported 1099 income. After reviewing bank deposits and payor statements, we discovered a duplicate 1099 issuance. Sending the correct 1099 and a concise cover letter resolved the issue within weeks.
  • Example 2: A sole proprietor received a Final Notice of Intent to Levy. We requested a CDP hearing within the 30-day window and proposed a partial-payment installment agreement that the IRS accepted pending verification of cash flow.

Quick reference: What to look for on the notice

  • Notice number (top right or top left)
  • Tax year and tax form (1040, 941, etc.)
  • Amount due, including interest and penalties
  • Due date to respond
  • Appealable action and instructions for requesting an appeal or CDP hearing
  • Contact phone number and mailing address for response

Final advice and next steps

Always act. Even if you cannot pay, communicating with the IRS, documenting your case, and choosing the correct remedy (installment agreement, OIC, CNC, or appeal) reduces stress and limits long-term harm. If you’re unsure where to start, consult a qualified tax professional and consider contacting the Taxpayer Advocate Service for urgent hardship cases.

Professional disclaimer: This article provides general information and education—not specific legal or tax advice. For advice tailored to your facts, consult a CPA, enrolled agent, or tax attorney.

Authoritative sources and further reading

Internal FinHelp links

If you need a checklist template or sample response letter, our site offers downloadable templates and step-by-step walk-throughs to help you prepare a reply that meets the IRS timeline and documentation standards.