Few things cause more stress than receiving a letter from the IRS. But before you panic, know that not all IRS notices mean trouble. In fact, some are routine and require minimal action.
Understanding why you received a notice, what it means, and how to respond can help you handle the situation with confidence. Here’s what to do when an IRS letter lands in your mailbox.
1. Don’t Ignore the Notice
The worst thing you can do is ignore an IRS notice. If you fail to respond, penalties and interest can accrue, and in some cases, the IRS can take collection action against you.
2. Read the Notice Carefully
Every IRS notice has a letter/notice number (e.g., CP2000, CP14, LT11) that indicates the reason for contact. Some common reasons for IRS notices include:
- Balance due: You owe taxes and need to pay or make arrangements.
- Math error or discrepancy: The IRS found a calculation error on your return.
- Underreported income: A mismatch between what you reported and what third parties (like employers) reported.
- Audit notice: The IRS is requesting more information or an examination of your return.
3. Verify the Information
Errors happen, and the IRS isn’t infallible. Review your tax return and records to confirm whether the notice is accurate. If you find a mistake, correct it promptly.
4. Respond Promptly (If Required)
- If the notice requests additional information, respond by the deadline provided.
- If you disagree with the notice, send a written dispute with supporting documents.
- If you owe money but can’t pay in full, explore payment plans or offers in compromise.
5. Watch Out for Scams
The IRS never initiates contact via phone, email, or text demanding payment. If you receive such a message, it’s a scam—report it to the Treasury Inspector General for Tax Administration (TIGTA).
Receiving an IRS notice can be nerve-wracking, but most issues can be resolved easily if you act quickly. If you’re unsure how to handle your notice, a tax professional can help you navigate the situation.
