Responding to an IRS Request for Verification of Income: Practical Steps

Why this matters

An IRS request for verification of income usually follows a mismatch between what you reported on your tax return and information the IRS received from employers, banks, or payers (W‑2s, 1099s, SSA records). If you ignore the notice, the IRS may adjust your return, assess additional tax, penalties, and interest, or open a broader inquiry. Timely, organized responses often avoid escalation and reduce added costs.

(For CP2000 and other common notices, see the IRS guidance for responding to notices: https://www.irs.gov/individuals/respond-to-an-irs-notice-or-letter.)

Quick checklist (start here)

• Read the notice carefully and note the deadline. Many IRS notices give 30 days to reply (CP2000 commonly gives 30 days). See the notice for the exact deadline. (IRS, 2025)
• Collect original documents the IRS identified (W‑2, 1099, bank statements, year‑end pay stubs, or business income ledgers).
• Decide whether you agree or disagree with the IRS’s proposed change.
• Prepare a clear response letter and copies of supporting documents.
• Send your response exactly as the notice instructs (mail to the address shown; include the notice copy and any return form number requested).
• Keep copies of everything and proof of mailing (certified mail or a tracked delivery service).

Step‑by‑step: How to prepare your response

1. Read the notice line by line

• The notice includes the tax year under review, the specific income items in question, the IRS’s proposed adjustments, and the deadline and mailing address. Treat the deadline seriously.

1. Gather evidence that proves your position

• Common acceptable documents:
• W‑2s or corrected W‑2c
• IRS Forms 1099 (1099‑MISC/NEC, 1099‑INT, 1099‑DIV)
• Bank statements showing deposits from a payer
• Invoices, receipts, and client payment records for freelancers
• Payroll stubs that reconcile to the W‑2
• SSA earnings record for wages reported to Social Security
• A signed and dated explanatory affidavit when records are incomplete
• Use IRS transcripts when originals are unavailable. You can order your Wage and Income Transcript via the IRS “Get Transcript” tool (Form 4506‑T or online) to show what the IRS received from payers. (IRS, “Get Transcript”, 2025)

1. Choose your response path: Agree vs Disagree

• If you agree with the IRS figures: sign and return the response (often a reply slip), and pay any tax due or arrange payment. Paying promptly minimizes interest and penalties.
• If you disagree: provide supporting documents that directly rebut the IRS figures. If the difference resulted from a missing W‑2 or duplicate 1099, explain and attach corrected forms (W‑2c for employers; corrected 1099s from payers). If you need to change your filed tax return, you may be advised to file Form 1040‑X to amend the return. (See IRS Form 1040‑X guidance.)

1. Draft a concise response letter
   Include these elements:

• Your full name, current address, taxpayer identification number (last 4 digits of SSN if the notice requires it), tax year in question, and the notice number (e.g., CP2000).
• A short summary that states whether you agree or disagree with the proposed adjustment.
• A numbered list of the documents you are sending and how each one supports your position.
• A polite request for confirmation of receipt or for the IRS to contact you with questions.
  Example opening lines (short and to the point):

“Re: Tax Year 2023 — Notice CP2000
Taxpayer: Jane Doe, SSN (last 4): 1234
I disagree with the proposed underreported wages shown on your notice. Enclosed are a copy of my employer W‑2 and payroll stubs that reconcile to the reported wages. Please update your records and advise if you need additional information.”

5. Include copies, not originals
   Send photocopies or digital scans. The IRS accepts copies for most items; only send originals when the notice specifically requests them.

6. Mail or submit exactly as instructed
   Follow the return address and submission instructions on the notice. If a fax option is given and you use it, confirm the fax number on the notice. For matters requiring secure handling, a mailed package with tracking and signature on delivery is standard practice.

7. Keep a clear file and timeline
   Retain a copy of the notice, your response letter, all attachments, and proof of mailing. Note the date you mailed the package and set follow‑up reminders (30 and 60 days after sending).

When to file an amended return (Form 1040‑X)

If the IRS is correct and you failed to report income, or you discover an error after you file, filing Form 1040‑X is often the correct step to formally correct your return and limit future issues. The IRS explains when to use Form 1040‑X and how to file it on their site. (IRS, Form 1040‑X, 2025)

If you need to file an amended return and the notice is already in process, include a copy of Form 1040‑X and a cover letter referencing the IRS notice when you submit it.

What if you can’t find the requested documents

• Explain the situation in writing. Provide alternate supporting evidence such as bank deposit records, client invoices, or an affidavit explaining your efforts to obtain the missing forms.
• Request additional time if you need to track down records. The IRS sometimes grants brief extensions; the notice explains how to ask. Do not simply ignore the deadline.

If you receive a CP2000 (proposed changes from third‑party data)

CP2000 notices are common when third parties (employers or payers) report income that does not match your return. FinHelp has specific guidance on CP2000 notices: see our article on “CP2000 Notice” and practical response steps here: CP2000 Notice. If you disagree with a CP2000, return the dispute form with documentation or sign the agreement and pay any balance due.

For a practical read on responding to IRS letters in general, see our guide: How to respond to an IRS notice.

When to get professional help or appoint a representative

• If the dollar amount is large, the issue is complex (business income, unreported contractors, passthrough income), or the IRS threatens enforcement action, consult a CPA, enrolled agent, or tax attorney.
• If you want a representative to speak or negotiate with the IRS, file Form 2848 (Power of Attorney) to allow them to represent you.

In my practice, bringing a professional into the conversation early often reduces back‑and‑forth and prevents small record gaps from becoming audits.

Common taxpayer mistakes to avoid

• Waiting until the deadline passes.
• Sending vague or incomplete explanations without documentation.
• Mailing original documents that cannot be replaced (instead, send copies).
• Assuming the IRS will not act — they match payers’ reports automatically and will generally propose changes.

Penalties, interest, and possible outcomes

If the IRS adjusts your return and tax is due, you may owe:

• The additional tax itself
• Interest from the original due date until paid
• Penalties for underpayment or negligence in some cases
  Correcting errors proactively (amendments and prompt responses) typically reduces penalties and sometimes prevents them altogether.

If you still disagree after submitting evidence, you have appeal rights — the IRS Independent Office of Appeals handles disagreements on proposed adjustments. The notice or subsequent correspondence will explain appeal and collection due process rights.

Evidence checklist (use this when assembling your packet)

• Copy of the IRS notice (front and back)
• Copy of the filed tax return for the year in question
• W‑2, W‑2c (if corrected), payroll stubs
• All relevant 1099s and corrected 1099s
• Bank statements showing deposits from payers
• Invoices, receipts, contracts showing services rendered
• A one‑page explanatory cover letter
• Form 1040‑X if you are amending the return

After you respond

Allow at least 6–12 weeks for the IRS to process correspondence it receives by mail. Processing times can be longer during peak seasons. If you filed electronically or had a tax pro submit information via established IRS channels, response times may be faster. If you have not heard back after the indicated processing window, contact the IRS using the phone number on the notice and reference the date you mailed your response.

Final notes and professional disclaimer

Respond to an IRS request for verification of income promptly, clearly, and with supporting documents. Organize your evidence, follow the instructions on the notice exactly, and consult a qualified tax pro for complex disputes.

This article is for educational purposes only and does not constitute tax advice. For specific guidance about your situation, consult a CPA, enrolled agent, or tax attorney. Authoritative sources consulted include the Internal Revenue Service (IRS) guidance on notices and Form 1040‑X (irs.gov) and the IRS “Get Transcript” tools.

Sources

• IRS — Respond to an IRS Notice or Letter: https://www.irs.gov/individuals/respond-to-an-irs-notice-or-letter
• IRS — CP2000 Notice information and response instructions: https://www.irs.gov/individuals/cp2000-notice
• IRS — Form 1040‑X Instructions: https://www.irs.gov/forms-pubs/about-form-1040-x
• IRS — Get Transcript: https://www.irs.gov/individuals/get-transcript

Related FinHelp articles

• CP2000 Notice: https://finhelp.io/glossary/cp2000-notice/
• How to respond to an IRS notice: https://finhelp.io/glossary/how-to-respond-to-an-irs-notice/
• Amending Your Return with Form 1040‑X: https://finhelp.io/glossary/amending-your-return-with-form-1040-x-common-reasons-and-pitfalls/