What to Do If You Get a Letter from the IRS

If you receive a letter from the IRS, don’t panic. While the possibility of a bill or an audit can be intimidating, there are numerous reasons why the IRS sends letters and notices, many of which are benign. 

If you get a letter from the IRS, open it as soon as possible. It can be tempting to procrastinate about opening the notice in an attempt to stave off possible bad news. Avoid this temptation! You may be able to resolve the issue in a few straightforward steps. By the end of this article, you’ll understand the most common reason for IRS letters, the process for responding, and how to help prevent future notices.

Why Does the IRS Sends Letters to Taxpayers?

Each year, taxpayers work to prepare and file their tax returns before the IRS due date. Filing a tax return requires you to gather various documents, fill out specific paperwork, and ensure your information is up-to-date. It’s possible to make mistakes or miss important details along the way.

When you submit the IRS reviews your forms to ensure the details are consistent with your tax obligations. Sometimes, they reach out for clarification. Here are a few of the more common notices the IRS sends to taxpayers (along with the associated code):

  • Changes to Tax Return (CP 11)
  • Balance Due (CP 14)
  • Data Processing Adjustment Notices (CP 22A)
  • Examination Adjustment Notices (CP 22E)
  • Estimated Tax Discrepancy (CP 23)
  • Delinquent Return Refund Hold (CP 88)
  • Request for Payment or Notice of Unpaid Balance (CP 161)
  • Reminder Notice, Balance Due (CP 501)
  • Second Request Notice, Balance Due (CP 503)
  • Final Notice, Balance Due (CP 504)
  • Final Notice of Intent to Levy (LT11 or L1058)

The letters may ask questions about the information in your return, notify you about an outstanding balance, or even alert you about the possibility of a refund. As tax filing becomes increasingly electronic, you may also be asked to verify your identity. Sometimes, the letter is about an IRS issue—they might be alerting you about a delay processing your return. (In many circumstances, the IRS is required by law to send you a written notice as documentation.)

What Should I Do After an IRS Notice?

Each letter from the IRS outlines its purpose and guides you on resolving the alleged matter. Below, we summarize the more common notices we outlined earlier.

Tax Return Changes (CP 11)
This letter indicates an outstanding balance based on any changes that occurred when your tax return was processed. It serves as the first reminder of your tax balance. If you can, pay the amount due immediately. If you disagree with the letter or can’t pay the balance in full, call the phone number provided.

Balance Due (CP 14)
Simply put, the CP 14 lets you know that you owe the IRS money. Pay the indicated amount as soon as possible to avoid interest or penalties.  If you don’t pay the balance due, the IRS will send you a Reminder Notice (CP 501), then a Second Request Notice (CP 502), and eventually the Final Notice (CP 504). If you ignore all these letters, you’ll receive an L 11 or L 1058 notice. This formal letter notifies you the IRS will levy your bank account, wages, and other assets if you don’t pay your balances or set up a payment plan.

Exam Tax adjustment (CP 22E)
The IRS will send you a CP 22E notice if an examination tax adjustment on your account results in a balance of at least $5. In other words, it’s a notification of an outstanding balance. Send your payment in the enclosed envelope as soon as possible, or call the number provided to discuss your options.

Estimated Tax Discrepancy (CP 23)
If you file estimated taxes each quarter, you must ensure that the amount you pay the IRS each quarter matches the amount indicated on your Form 1040-ES. If there’s a discrepancy between the two, you’ll receive a CP 23 notice. If the letter indicates a balance, try to pay in full or request a payment plan. If you disagree with the letter or have additional questions, call the number provided as soon as possible. 

Delinquent Refund Hold (CP 88)
To receive a tax refund, you must be up to date on all tax returns and paperwork. If you qualify for a tax refund but owe information to the IRS, they send a CP 88 letter telling you they’re withholding your refund and why. File the missing tax return as soon as possible to receive your refund, or, if you believe the IRS made a mistake, contact them via the number provided. 

Request for Tax Payment (CP 161)
A CP 161 is similar to a Balance Due notice, but is specific to underpayment. It indicates the total amount you owe, how much you’ve paid, any additional credits applied to your account, and your outstanding balance. Pay the amount due before the deadline on the CP 161 notice to avoid interest and penalties. If you think you paid in full, examine the posted payments and revisit your records. If you find an error, inform the IRS for rectification.

How to Avoid Notices and Letters from IRS

To avoid any followup from the IRS, consider working with a tax accountant or financial professional who can help you make sure you’ve filled out the right forms and included the necessary details when preparing your return.

Often, the IRS requires specific supporting documents tied to deductions, credits, income and more. Even if you double-check your return or use preparation, it’s possible to miss details or misunderstand some of the more specific instructions.

Beyond working with a professional, be sure to keep save receipts and important documents and keep them in a safe and secure place. Check with a financial professional before getting rid of or destroying financial documents. The IRS suggests you save documents for varied lengths of time depending on the type of information included and your filing status. 

If you have questions about a letter you received from the IRS or need help preparing for a meeting with your tax accountant, contact a Bogart Wealth financial advisor to discuss.

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