While some notices are indeed serious, many are routine requests for information or notifications of minor adjustments. The most important thing is not to panic—and not to ignore it. Taking prompt and strategic action is key to resolving the issue efficiently.

If you’ve received an IRS tax notice, here’s a step-by-step guide on what to do next.

Step 1: Read the Notice Carefully

Don’t just glance at the letter. Read it from top to bottom, including any fine print. Pay close attention to a few key areas:

• The Notice Number: Usually found in the top right corner (e.g., CP2000, CP12, LT11). This number identifies the specific issue the IRS is contacting you about. You can look up the notice number on the IRS website to get a general understanding of its purpose.
• The Tax Year: The notice will specify which tax year it pertains to.
• The Deadline: Most notices require a response within a specific timeframe, typically 30 or 60 days. Missing this deadline can result in additional penalties or limit your appeal rights.

Step 2: Compare the Notice with Your Tax Return

The notice will explain why the IRS is contacting you. Often, it’s because their records don’t match the information you reported on your tax return. For example, a CP2000 notice is generated when the income reported by third parties (like your employer or a brokerage) is different from the income you reported.

Pull out your copy of the tax return for the year in question and compare it line by line with the changes the IRS is proposing. It’s possible the IRS is correct, or it could be that you made a simple clerical error. It’s also possible the IRS is wrong.

Step 3: Determine Your Course of Action: Agree, Disagree, or Need More Information?

Based on your review, you have three primary paths:

1. You Agree with the Notice: If the IRS is correct and you owe additional tax, the notice will include a payment voucher. You should pay the amount due by the deadline to avoid further interest and penalties. If you can’t pay the full amount, you can explore payment options like an installment agreement.
2. You Disagree with the Notice: If you believe the IRS’s information is incorrect, you need to respond in writing by the deadline. Your response should clearly explain why you disagree and include copies of any supporting documentation (e.g., corrected 1099s, bank statements, receipts). Do NOT send original documents.
3. The Information is Incorrect, but Not Your Fault: Sometimes a third party reports incorrect information to the IRS. In this case, you should contact the third party to have them issue a corrected form (e.g., a corrected 1099-B).

Step 4: Respond in Writing

Even if you speak with someone at the IRS on the phone, always follow up with a formal written response.

Send your letter and supporting documents via certified mail with a return receipt requested. This provides proof that you sent the response and that the IRS received it.

Your written response should be professional, concise, and directly address the issues raised in the notice.

When to Call a Tax Professional

While you can handle some simple notices on your own, it is highly recommended that you seek professional help in certain situations:

• The notice proposes a large tax liability.
• You don’t understand the notice or what the IRS is asking for.
• The issue involves complex tax laws, such as those related to business expenses, investments, or cryptocurrency.
• You are being audited.
• The notice is a Notice of Deficiency, which gives you 90 days to petition the U.S. Tax Court.

A California tax resolution lawyer can communicate with the IRS on your behalf, ensure your rights are protected, and develop a strategy to achieve the best possible outcome. They can lift the burden from your shoulders and provide the expertise needed to navigate the IRS’s complex bureaucracy.

Receiving an IRS notice doesn’t have to be a catastrophe. By taking a calm, methodical approach, you can resolve the issue and move forward with confidence. If you need help, the team at Kugelman Law is here to provide expert representation.

Disclaimer: This post is for informational purposes only and is not a substitute for professional tax or legal advice. Consult a qualified professional for guidance on your specific situation.

The IRS and the California Franchise Tax Board (FTB) impose steep failure-to-file penalties and interest, which can quickly spiral into overwhelming tax debt. If you have unfiled tax returns in California, taking action is the only way forward.

This guide provides a clear, step-by-step process to get back into compliance and find peace of mind. The most important thing to remember is that you have options.

The Consequences of Not Filing

Before diving into the solution, it’s crucial to understand the risks of inaction. The government has powerful tools at its disposal, including:

• Substitute for Return (SFR): The IRS can file a return for you based on information from employers and financial institutions. This return doesn’t include any deductions or credits you’re entitled to, often resulting in a much higher tax liability.
• Penalties and Interest: The failure-to-file penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late, up to 25% of your unpaid taxes. Interest also accrues daily.
• Collections Actions: Unpaid tax debt can lead to federal tax liens, wage garnishments, and bank levies.
• Loss of Refunds: If you are due a refund, you must file a return to claim it within three years of the due date.

Your 5-Step Action Plan to Get Compliant

Step 1: Gather Your Documents

The first step is to collect all the necessary income documents for the years you need to file. This includes W-2s, 1099s, and records of any other income. If you’re missing documents, you can request a Wage and Income Transcript directly from the IRS website for the relevant years. This transcript will show all the income information reported to the IRS under your Social Security number.

Step 2: Prepare the Tax Returns

Once you have your documents, you must prepare the returns for each unfiled year. It’s highly recommended to work with a professional for this step. A California tax resolution attorney can ensure the returns are prepared accurately, claiming all eligible deductions and credits to minimize your tax liability. Do not file the returns just yet—this is a critical part of the strategy.

Step 3: Analyze Your Total Tax Debt

After preparing the returns, you’ll know the total amount of tax, penalties, and interest you owe to the IRS and FTB. This number is the foundation for determining the best resolution strategy. It’s often a shock, but seeing the full picture is necessary to move forward.

Step 4: Explore Your Resolution Options

Simply filing the returns without a plan to pay can trigger immediate collections actions. This is where professional guidance is invaluable. An experienced tax attorney can help you explore options, such as:

• Offer in Compromise (OIC): An agreement with the IRS to settle your tax debt for less than the full amount owed. This is for taxpayers experiencing significant financial hardship.
• Installment Agreement: A monthly payment plan to pay off your tax debt over time.
• Currently Not Collectible (CNC) Status: If you can prove you’re unable to pay your living expenses and your tax debt, the IRS may temporarily halt collection efforts.
• Penalty Abatement: You may be able to have penalties removed if you can show “reasonable cause” for your failure to file on time.

Having a skilled tax attorney negotiate on your behalf provides a crucial buffer between you and the IRS, protecting your rights and working towards the most favorable outcome.

Step 5: File the Returns and Secure a Resolution

Once a strategy is in place, your attorney will help you file the back tax returns and submit the appropriate resolution request (e.g., an OIC application or an installment agreement proposal). This proactive approach shows the IRS you are making a good-faith effort to comply.

Don’t Wait Any Longer

Facing unfiled tax returns is stressful, but you don’t have to do it alone. The team at Kugelman Law specializes in helping Californians resolve complex tax issues.

We can guide you through every step, from preparing your returns to negotiating with the IRS and FTB. Contact us today for a consultation and take the first step toward tax relief.

Disclaimer: This blog post provides general information and does not constitute legal or tax advice. Tax situations are complex and you should consult a qualified professional for advice regarding your individual circumstances.