Taxpayers often panic when they receive a letter from the IRS, usually because of the tone. While issues like a forthcoming tax audit can give you sleepless nights, there are many other reasons why the IRS sends letters and notices. You can get one requesting that you update or verify your information, for example. It may also be a notification about some adjustments done to your return that resulted in you owing taxes.
Once you receive a notice or letter, your next step is to understand its contents and take the necessary action immediately. In this guide, we will explain:
- Why the IRS sends letters
- Examples of letters and notices
- How to react to IRS letters
- How to prevent IRS letters in the future
Read on to understand how you can resolve tax issues through a few straightforward steps. You’ll also learn the role of a tax preparer in preventing letters from the IRS.
Why the IRS Sends Letters to Taxpayers
Taxpayers must prepare and file their tax returns before the tax filing due date every year. You must gather various documents, fill out the right tax forms, and submit an accurate return to the IRS. Along the process, you can make errors or miss important details. After submitting your taxes, the IRS reviews your forms to ensure the details are consistent with your tax obligations. Sometimes, they will reach back out to you.
Getting a notice or letter from the IRS can be unsettling. However, the tax body sends many types of letters to taxpayers, so you shouldn’t always get terrified. Here are examples of letters and notices it sends.
- CP 11: Changes to Tax Return
- CP 14: Balance Due
- CP 22A: Data Processing Adjustment Notices
- CP 22E: Examination Adjustment Notice
- CP 23: Estimated Tax Discrepancy
- CP 88: Delinquent Return Refund Hold
- CP 161: Request for Payment or Notice of Unpaid Balance
- CP 501: Reminder Notice, Balance Due
- CP 503: Second Request Notice, Balance Due
- CP 504: Final Notice, Balance Due
- LT11 or L1058: Final Notice of Intent to Levy
The letters primarily revolve around questions in your return, balances due, or when the IRS changes something in your return. You may also get notified when you’re eligible for a smaller or larger refund, need to submit more information, to verify your identity, or to alert you about return processing delays.
Things to Do After Receiving a Letter from IRS
Each letter from the IRS outlines its purpose and guides you on resolving the alleged matter. Below, we explain some essential things about IRS letters.
CP 11: Tax Return Changes
This letter from IRS indicates a tax balance that resulted from changes during your return processing. It also serves as the first reminder of your tax balance. When you receive a CP 11 notice, consider paying the amount due immediately. If you disagree with the letter or can’t pay in full, call the indicated phone number.
CP 22E: Exam Tax adjustment
You get the CP 22E notice when an examination tax adjustment on your account results in a balance of at least $5. Send your payment in the enclosed envelope as soon as you receive a CP 22E, or call the IRS to discuss other tax settlement arrangements.
CP 23: Estimated Tax Discrepancy
The amount deposited in your tax account must be the same as the estimated tax payments claimed on your return. If there’s a discrepancy between the two, you’ll receive a CP 23 notice. After receiving a CP 23 letter from IRS, pay the balance due without delay or request to create a payment plan. You can also call to ask questions if you have reasons to disagree with the CP 23.
CP 88: Delinquent Refund Hold
Only taxpayers who have filed all the necessary returns are entitled to receive their tax refunds. The IRS sends you a CP 88 letter to notify you that they have held your refund because you failed to file a past return. To receive your refund, be sure to file the missing tax return at the soonest available opportunity. If you’re confident that you’ve filed all your returns, contact the IRS for clarification.
CP 161: Request for Tax Payment
Unlike the common belief that CP 161 reports calculation errors, the letter notifies you about underpaid taxes. It outlines the amount of tax you have paid and any credits applied to your account. 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.
CP 14: Balance Due
The CP 14 notice informs you about underpaid taxes or balances in the amount of tax owed. You can resolve it like CP 161 above. 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.
How to Avoid Notices and Letters from IRS
Here are a few steps to take every year to properly satisfy your tax requirements:
- Be sure to fill the right forms and include all the necessary details when preparing your return.
- Provide supportive information for every tax credit and deduction you want to claim.
- Double-check your return before submitting it.
- Understand how long to store your records to use them as your defense in the event of an IRS notice.
A trusted wealth management professional can provide impeccable tax management services, using a vast knowledge of tax laws and procedures to minimize your tax liability and maximize your refund within the law. The professional will prepare an accurate tax return on your behalf and offer expert advice if you get a letter from the IRS. Contact Bogart Wealth today to discuss your IRS letter questions or other wealth management-related concerns you might have.