What to Do When You Receive an IRS Notice in the Mail

There are few things more anxiety-inducing than finding a letter from the Internal Revenue Service in your mailbox. Your mind might immediately jump to the worst-case scenario: a full-blown audit.

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.