What to do if the IRS Sends You a Letter?
Unless you are expecting a refund, no one likes to find an envelope from the IRS in their mail.
Don’t panic, don’t call them and don’t ignore the letter. You are simply one of millions of Americans who receive a notice of some kind from the IRS.
What are Some Reasons You’d Receive a Letter?
- It could be a notice of a minor adjustment or correction to a recently filed federal tax return. In that case, it will affect your refund, or your taxes owed.
- Additional information might be needed.
- Your identity might need to be verified.
- There may be a question about your tax return.
- There might be a delay in processing your return.
Whatever the reason the IRS letter landed in your mailbox, take a deep breath and open it. The letter is likely to be very specific about including instructions, if you need to take any action. Often, it is simply a notification that requires no action. The letter will let you know, one way or the other.
If the letter does reflect a change in your tax return total, let your tax preparer know. In fact, if it is anything other than a minor notice, your tax preparer will want to add the information to your file.
When the IRS requests something, it is a good idea to respond in a timely fashion. That usually means within 30 days. If more money is being requested, unless the amount is related to a minor penalty or tax increase, it’s a good idea to run it by your tax preparer prior to making a payment.
If the notice refers to a questionable Social Security number, or name misspellings compare the information contained in the copy of your return and write or call the IRS with the proper information. If you write, rather than call, save a copy of both the letter and your response to it. Include photocopies of any information you need to send. If you call, you may want to take notes (including the name or employee ID of the person you speak to) and attach them to your IRS letter to save with your tax file.
What do the Codes Mean?
The IRS uses a coding system when they send out a notice. It is located in the upper righthand corner of letter. According to the IRS the following are a few of the codes and what they mean:
- Notice CP23 – relates to a tax discrepancy and balance due, when the amount you entered for your estimated tax payments differs from the amount the IRS has received.
- If you have back-up information to prove your figures (W2’s, estimated tax payment cancelled checks, and bank and financial management fees. If the mistake is yours, you may still want to check with your tax preparer, prior to sending that check. They will need that information for your tax return the following year.
- Notice CP49 – indicates an overpayment of your tax liability that the IRS is applying to another of your outstanding taxes owed. This notice requires no action, unless you need further explanation from the IRS or you dispute their figures.
- Notice CP2000 – is issued because the IRS sees a discrepancy in the information provided, regarding the interest reported on your 1040. If the bank or your brokerage gave the IRS a different figure, they will issue this notice. It may be easily explained. For instance, if you sold stocks for less than you paid for them, it stands to reason you didn’t make a profit or interest on them. However, the IRS only sees the amount of the transaction and may believe you owe taxes on that amount. You will need to prove what the stock was worth when you acquired it.
For a more detailed look at why the IRS might send you a letter, they’ve created this page on their site to explain why you might receive a letter. The IRS is also cautioning that if a letter looks at all suspicious, to report it to their Report Phishing page. They also have a phone number – 800-829-1040 for reporting. Remember also, the IRS will never ask taxpayers for personal information via e-mail or social media.
If you receive a letter from the IRS and want advice, call our Corte Madera office today. Our tax professionals can help you sort through the codes and requests.