Don't panic when that letter from the Internal Revenue Service arrives. Many tax notices can be dealt with simply and painlessly.
Each year, the IRS sends out millions of notices. Most of these let taxpayers know of common filing mistakes that mean a change in a tax bill. Others request additional information about a return. The notice normally covers a specific issue and offers equally specific instructions on what the IRS wants from you to settle the matter.
Commonly Issued Tax Notices
Each IRS notice is identified by its CP, or collection process, number found in the upper right corner of the first page of the correspondence. Each also has a title in large, bold print near the center of page one.
Here are the most common tax notices and why they are issued:
|CP number||Tax reason|
|CP 12||Changes to correct a miscalculation on your return|
|CP 14||You owe money on unpaid taxes|
|CP 49||Overpaid tax applied to other taxes you owe|
|CP-90 & CP-297
|Final notice -- notice of intent to levy and notice of your right to a hearing|
|CP-91 & CP-298
|Final notice before levy on Social Security benefits|
|CP 161||No math error, balance due|
|CP 501||Reminder notice -- balance due|
|CP 504||Urgent notice -- balance due, seizure of state income tax refund imminent|
|CP 523||Notice of default on installment agreement and imminent seizure of assets|
|CP 2000||Notice of proposed adjustment for underpayment or overpayment|
If your notice isn't listed above, you can call the special IRS.gov notices page for the document. You also can call the IRS at the number listed on your notice or at the agency's toll-free help line at (800) 829-1040. Hearing-impaired and TTY users can call (800) 829-4059.
First, check your information
The first thing to do when you get a tax letter is to pull out the tax return in question. Compare your file copy with the IRS notice. You might find that you did indeed add when you meant to subtract or transposed a number or put an entry on the wrong line.
In cases where you agree with the change the IRS proposes to your tax account, no reply is necessary unless a payment is due. If you owe additional tax, follow the notice instructions about where to send the extra cash.
When you disagree
If, however, you believe the IRS is wrong, let the agency know as soon as possible. Call the number on the notice, or, if you prefer, send the tax agency a written explanation for the suspected discrepancy.
If you write, feel free to include any documents and information you want the IRS to consider -- such as copies of your tax return, canceled checks or other records -- along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. It generally takes the IRS at least 30 days to get back to you.
Sometimes, the IRS will send a second letter or notice requesting more information or responding to your questions about the original notice. Again, stay calm. These follow-up letters aren't unusual either, just part of the precise tax-resolution process the IRS uses. Simply follow the instructions or answer the additional questions.
Seeking further help
If you find your communications with the IRS about a notice don't end to your satisfaction, you still have options. You can request an appeal under the Collection Appeals Program or you may be entitled to an appeals hearing. Your request must be filed within 30 days of the notice.
You can also ask the Taxpayer Advocate for help in resolving the matter. The Taxpayer Advocate service is an independent system designed to deal with tax problems that are not resolved through normal channels. Each state and IRS service center has at least one local Taxpayer Advocate who independently represents your interests and concerns within the IRS.
The service has a special IRS Web page or you can call the office's main toll-free number at 1-877-777-4778 (or TTY/TTD 1-800-829-4059). If you prefer to speak to an advocate in person, check out IRS Publication 1546, The Taxpayer Advocate Service of the IRS, to find the office nearest you.
Remember, the key to dealing with any IRS notice is prompt action on your part.
If the IRS change to your tax bill is correct, your immediate response to the notice will ensure that you will only owe additional tax and not added penalties and interest. If the IRS is wrong, you definitely want to get the matter corrected as soon as possible to prevent any future tax problems.
And whether you're still working through a notice with the IRS or moving on to the Taxpayer Advocate for help, be sure to keep copies of all IRS correspondence with your tax records.
For more information about IRS notices and tax bills, see Publication 594, Understanding the Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax.