Receiving a tax notice or letter from the Internal Revenue Service (IRS) can be a nerve-wracking experience for any taxpayer. However, it’s important to remember that not all notices are cause for alarm. The IRS sends out a variety of notices for different reasons, ranging from simple inquiries to requests for additional information. In this comprehensive guide, we’ll walk you through the steps to take when you receive a tax notice or letter from the IRS, help you understand the different types of notices you might encounter, and provide you with essential do’s and don’ts to navigate the situation with confidence.
When a Tax Notice or Letter from IRS arrives in the mail, here’s what taxpayers should do:
Read the letter carefully:
Upon receiving a notice from the IRS, the first step is to read the letter carefully. Take your time to understand the nature of the notice and what it requires from you. The information provided in the letter is crucial for determining the appropriate course of action.
Review the information:
After reading the notice, review the information contained within it. Cross-reference the details mentioned in the notice with your own tax records to identify any discrepancies. This step will help you grasp the specific issue at hand.
Take any requested action, including making a payment:
If the notice indicates that you owe taxes or require taking a specific action, such as making a payment, it’s important to address it promptly. Ignoring such requests can lead to penalties and interest accruing over time.
Reply only if instructed to do so:
Not every notice requires a response. Some notices are for informational purposes only, and the IRS may not need any action from you. Only reply if the notice explicitly instructs you to do so.
When to respond:
If the notice requires a response, ensure you adhere to any specified deadlines. Failing to respond within the given timeframe can lead to further complications.
How and where to reply:
Follow the instructions provided in the notice regarding how and where to respond. Some notices may require a written response, while others may offer online response options through the IRS website.
What if I want to talk to someone?
If you have questions or concerns about the notice, the IRS typically provides a contact number you can call. Be prepared to provide your notice or letter number when contacting them. Keep in mind that wait times can be long, so exercising patience is important.
Let the IRS know of a disputed notice:
If you disagree with the information presented in the notice, you have the right to dispute it. Follow the dispute resolution instructions provided in the notice, which often involve submitting additional documentation to support your position.
Keep the notice or letter from IRS for their records:
It’s crucial to retain a copy of the notice or letter and any related documents for your records. Having this documentation on hand will be valuable if you need to refer back to it or if the issue persists.
Watch for scams:
Unfortunately, there are individuals who attempt to exploit the situation by sending fake IRS notices. Be vigilant and cautious of any communication claiming to be from the IRS through email, text messages, or social media. The IRS primarily communicates through traditional mail.
Understanding Your Notice or Letter from IRS
Why was I notified by the IRS?
The IRS sends out notices for various reasons, and understanding the purpose of your notice is essential. You might receive notice due to:
- Discrepancies in reported income or deductions.
- Outstanding tax balance.
- Changes made to your tax return by the IRS.
- Requests for additional information or identity verification.
- Notices of intent to levy or seize assets.
- Notifications about overpayments on your account.
- Delays in processing your return.
When you receive a notice, the following steps are crucial:
- Carefully read and comprehend the notice’s contents to grasp its significance.
- Respond promptly if a response is required, abiding by the deadline specified in the notice.
- If there’s a balance due, make the necessary payments in line with the instructions provided.
- Keep a copy of the notice or letter and any relevant documents in your records.
The location of the notice or letter number:
Identifying the notice or letter number is key to efficient communication with the IRS. This number is usually located in the upper right-hand corner of the correspondence. Mention this number when communicating with the IRS to facilitate swift assistance.
Types of Tax Notices or Letter From IRS
You have a balance due:
This category of notices informs you of an outstanding tax debt that requires payment. Different notice numbers are associated with this type of communication, such as CP14, CP501, CP503, CP504, and CP521.
The IRS has a question about or has changed your tax return:
Notices falling under this category address discrepancies or adjustments made to your tax return by the IRS. Notice numbers may include CP11, CP12, CP16, and CP2000.
They need to verify your identity:
If the IRS needs to verify your identity for processing your return, you might receive a notice for identity verification. Notice numbers in this context encompass Letter 5071C and Letter 4883C.
This notice signifies the IRS’s intention to levy or seize your assets to settle a tax debt. Notice numbers linked to this purpose include CP90 and CP297.
They need additional information:
Notices requesting additional information seek documentation or details to support your tax return. Notice numbers for this objective involve Letter 12C and Letter 4464C.
They need to notify you of delays in processing your return:
Notices in this category provide information about delays in processing your return and offer estimated completion dates. Notice numbers, such as Letter 6312 and Letter 6313, relate to this type of communication.
There was an overpayment on your account:
When you have overpaid your taxes, you might receive a notice detailing the excess payment. You can opt to apply it to future taxes or request a refund. Notice numbers like CP22A and CP22E pertain to this scenario.
Under this diverse category, you’ll encounter notices related to various subjects. This might encompass changes to your installment agreement or other updates regarding your account. The specific notice numbers vary based on the nature of the communication.
Do’s and Don’ts for taxpayers who get the notice or letter from IRS
Don’t ignore it:
No matter the nature of the notice, ignoring it is never advisable. Even if the notice is for informational purposes, not addressing it can lead to escalated issues down the line.
While receiving an IRS notice can be concerning, remember that the notice might be routine and not indicative of any wrongdoing on your part. Stay composed and proceed methodically.
Do read the notice:
Understanding the reason for the notice is paramount. Reading the notice in its entirety will help you grasp what the IRS is communicating and what actions are required.
Do respond timely:
If the notice necessitates a response, adhere to the provided timeframe for replying. Responding within the stipulated period showcases your cooperation and helps prevent unnecessary penalties.
Do pay the amount due:
If the notice pertains to an outstanding tax balance, it’s essential to make the payment as instructed. Timely payments minimize the accrual of additional penalties and interest.
Do keep a copy of the notice or letter from IRS:
Maintaining a copy of the notice and any accompanying documents is beneficial. This record can serve as a point of reference in case of future inquiries or disputes.
Do remember there is usually no need to call the IRS:
In most cases, the information and instructions you need are provided within the notice itself. Calling the IRS should be reserved for specific situations not covered in the notice.
Receiving a tax notice or letter from the IRS might be unsettling, but it’s essential to handle the situation calmly and promptly. By understanding the type of notice you’ve received, following the provided instructions, and keeping a copy of all correspondence, you can navigate the process successfully. Remember, the IRS’s primary goal is to ensure accurate tax reporting and compliance, and addressing their inquiries professionally can lead to a swift resolution.