Have You Received a Letter from the IRS? If So, Here's What You Need to Do

The agency may contact you for other reasons besides an audit

Have You Received a Letter from the IRS? If So, Here's What You Need to Do
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April 21, 2017

To the relief of taxpayers across the country, Tax Day has come and gone for another year. What many people do not know is that the IRS may still contact them, even if they're not being audited.

According to the IRS, more people were informed about math errors on their returns last year than were audited.

If you get a letter from the taxman, open it immediately. If someone else prepared your taxes for you, let them know about all but the most minor issues. Respond to the letter in writing within the prescribed period, which is usually 30 days. Include copies of your evidence with your response.

If the letter informs you of a name misspelling or an incorrect Social Security number, check your return and call the agency with the correct information.

Here are examples of some of the notices that the IRS may send you:

  1. Overpaid Taxes
  2. You'll receive a document called Notice CP 49 when the IRS applies any overpaid taxes to other taxes that you owe. You don't have to do anything when you receive this notice unless you disagree with the amount.

  3. Mismatched Information
  4. If the amount of interest you report on your 1040 is different from the amount that your bank or brokerage reported, the IRS will send you Notice CP 2000, which will outline the difference.

    If the amount you claimed in estimated tax payments is different from the amount that the IRS received, it will send you Notice CP 23, "Estimated Tax Discrepancy, Balance Due."

    To correct these mistakes, write a letter explaining the difference and attach the evidence, such as W-2 forms, canceled checks for estimated payments, or bank or brokerage statements. If you realize that you made a mistake, sign the notice and send it back with your check.

  5. Correspondence Audits
  6. If the agency sees any red flags on your return, it will ask you for detailed backup information, such as a mileage log for business mileage claimed. Respond within 30 days; if you don't, you'll lose the deduction, even if you were correct.

  7. Audit Request
  8. Although it is unlikely that you will be audited, it is possible. If you do receive an audit request notice, take it to your tax preparer or to a qualified certified public accountant or an enrolled agent (a professional who is authorized by the IRS to prepare tax returns).

  9. Balance-Due Notices
  10. CP 14, "Balance Due, No Math Error," means that the IRS thinks you underpaid your tax bill. If you respond on time, you may eliminate penalties, though it won't reduce your tax liability or the interest accrued since the deadline for filing.

    If you ignore the notice, you'll get a different one: CP 501, "Reminder Notice – Balance Due." This notice makes the beginning of the agency's seizure process. If you don't respond to this one either, you'll get CP 504, "Final Notice – Balance Due." This is the last notice you'll get before the IRS can start to levy your accounts, i.e. take your money to pay your debts. If you receive this notice, you'll have 10 days to respond before the IRS can act.

  11. Final Notice and Intent to Levy
  12. If you receive Notice CP 90/CP 297, "Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing," the IRS is telling you that it's going to hold your money hostage to pay your debt. You will have 30 days to file an appeal. If you get this notice, go straight to a professional tax preparer or expert and give him or her all of your records that you can find.

Getting a letter from the IRS is not the end of the world. Make sure to open it right away and take the appropriate action, and your life will be much easier.