Every year, the Internal Revenue Service (IRS) sends over 100 million notices to taxpayers across the United States. These letters serve various functions—some are routine updates, others request additional information, and some alert taxpayers to discrepancies or unpaid taxes. While receiving an IRS notice can cause concern, understanding how to respond is crucial to safely managing your tax affairs.
What Is an IRS Notice?
An IRS notice is a formal written communication from the IRS that informs you about an issue related to your tax return or account. It could be as simple as advising you about a change in your refund status, or more serious, like proposing an adjustment to your reported income.
Unlike phone scammers who impersonate the IRS, the IRS typically sends notices by postal mail, so it’s important to verify the authenticity of any communication you receive. Always cross-check the contact information and avoid responding directly to suspicious emails or calls. For official IRS notices, verify phone numbers on IRS.gov, the IRS’s official website.
How to Identify the IRS Notice Type
IRS notices are identified by a code at the top right corner, usually starting with “CP” (for computer-generated notices) or “LTR” (for letter notices). For example, a CP2000 notice indicates a mismatch between income reported on your return and what third parties have reported to the IRS.
Steps to Take When You Receive an IRS Notice
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Stay Calm: Most IRS notices are administrative or informational and do not automatically mean you owe more tax or are under audit.
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Read the Notice Thoroughly: The letter will explain why it was sent, the issue at hand, and any action required. Note any deadlines carefully.
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Confirm the Notice Is Legitimate: Avoid scammers by verifying the notice details. The IRS does not initiate contact by email, text, or phone about taxes owed without a prior conversation.
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Collect Relevant Documentation: Gather your returns, W-2s, 1099s, receipts, and bank statements related to the tax year mentioned.
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Respond Promptly: Follow the instructions on the notice. Responses can often be by mail, and in some cases, online through your IRS account.
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Keep Copies: Retain copies of the notice and all correspondence for your records, especially if you are mailing a reply. Consider certified mail for proof of delivery.
Common IRS Notices and How to Respond
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CP2000 Notice: Informs you of a discrepancy between your reported income and IRS records from third parties.
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Response: Review your documents and either agree and pay the additional amount or dispute with evidence.
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CP501, CP503, CP504: Reminder notices for unpaid taxes, escalating in severity.
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Response: Pay the balance or contact the IRS to discuss payment plans or hardship options.
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Notice 1058 / LT11 (Intent to Levy): Indicates impending property or wage seizure due to unpaid tax.
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Response: Act immediately to resolve or appeal.
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Notice of Deficiency (90-Day Letter): Proposes adjustments and gives you 90 days to contest in Tax Court.
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Response: Consider professional assistance and act within the timeframe to avoid default judgments.
Who Receives IRS Notices?
IRS notices go to any taxpayer with tax-related interactions, including individuals, self-employed workers, and businesses. Sometimes notices arise from errors by third parties, like employers or financial institutions, not necessarily the taxpayer’s mistakes.
Tips for Handling IRS Notices Successfully
- Don’t delay addressing the notice; timely response helps avoid penalties.
- Organize your tax documents to support your case.
- Verify all information carefully against your records.
- When calling the IRS, verify the phone number from the official website and be prepared for long wait times.
- Seek help from a CPA, enrolled agent, or tax attorney when notices are complex or involve large amounts.
- Document all communications with the IRS for reference.
What Not to Do
- Never ignore an IRS notice—it can lead to escalating penalties or enforced collections.
- Don’t automatically assume the notice is a scam; verify but respond appropriately.
- Avoid sending original documents unless specifically requested to keep your records intact.
- Don’t provide unsolicited detailed explanations beyond what the IRS requests.
- Maintain respectful, factual communication.
Frequently Asked Questions (FAQs)
Can I respond online to an IRS notice?
Some notices allow online responses through the IRS website, but most require mailed replies. Always follow the notice instructions.
What if I disagree with the IRS findings?
Gather supporting documentation and send a clear, concise explanation referencing the notice. Consider professional advice.
What if I can’t pay the owed amount?
Contact the IRS to discuss payment options, such as installment agreements or Offers in Compromise.
How long will the IRS take to respond after my reply?
It may take weeks or months depending on the issue and time of year.
Is receiving a notice the same as an audit?
No. Many notices are routine inquiries or account updates, while audits are more in-depth examinations.
Additional Resources
For more detailed explanation of common notices, consider these linked resources:
- IRS Notice CP2000: Underreported Income
- IRS Notice CP503
- IRS Notice CP504: Final Notice Before Levy
- IRS Letter LT11 (Notice of Intent to Levy)
- IRS Notice of Deficiency
For authoritative information directly from the source, visit the IRS official site on responding to notices.
This guide provides practical, clear advice to help taxpayers understand and handle IRS notices confidently, minimizing tax debt risks and avoiding unnecessary penalties.
