Now that the tax filing deadline has come and gone, the IRS will start sending out notices and letters to taxpayers. Receiving a notice can be intimidating, especially if it’s unexpected. Generally, however, there’s no need to panic. Many are simply asking for more information or reminding you of a balance due. In this post, we’ll take a look at five common IRS notices and explain what you should do if you ever receive one.
Reasons Why You May Receive an IRS Notice
There are various reasons why the IRS may send you a formal notice or letter by mail, including:
- You have a balance due.
- You are due a refund but the amount differs from your tax return.
- The IRS has questions about your return.
- They need to verify your identity.
- The IRS needs additional information to process your return.
- They made changes to your return.
- There are delays in processing your return.
But, beware! Scammers are on the rise and are known to send fraudulent letters threatening legal action or jail time if you don’t contact them immediately. If the notice looks suspicious, do not respond. Instead, contact the IRS at 800-829-1040 to verify the notice is legitimate.
Common IRS Notices
The IRS sends more than 75 different notices and letters to taxpayers. Most, however, fall into five categories: general letters, collections, audits, return requests, and return errors. Here’s a quick look at five common IRS notices you might receive.
IRS CP2000 is a return error notice. It is generally sent when the income reported on your return doesn’t match the information received from third-party sources. Another reason may be that you improperly claimed certain tax credits. This is not a bill or an audit notice. It is simply a summary of changes being made to your return.
CP14 is an IRS collections notice. If you’re receiving this tax notice, you have a balance due but did not pay your taxes. The notice will contain a detailed summary of what you owe, including any penalties and interest, as well as any payments already made. If you ignore this notice, more will follow.
IRS CP501 is also a collections notice. It is a reminder that you have unpaid tax debt and you should take steps to correct the situation as soon as possible. Failure to pay your taxes by the requested deadline date will result in additional notices and eventually a levy notice.
IRS CP75 is an audit notice. The IRS typically sends this notice when it needs additional information to verify your eligibility for certain tax credits, such as the Earned Income Credit (EIC). If you are due a refund, any portion of the tax credit in question will be frozen until provide the requested information.
IRS collections notice CP90 should not be ignored. This Notice of Intent to Levy means that the IRS plans to seize your assets to satisfy your tax debt if you don’t respond within 30 days. It also explains your right to a Collections Due Process hearing before they take your property, wages, and/or bank accounts.
How to Handle Your IRS Notice
If you receive a notice or letter from the IRS, there are three steps you should take immediately.
- Read Your Notice – Always read and review your notice thoroughly. It will explain why you are receiving it, as well as what information you need to send to the IRS (if applicable). Pay close attention to any deadline dates!
- Respond – Depending on which type of notice you receive, you may need to complete a response form, as well as send in supporting documentation. If you are unable to do so within the timeframe provided (deadline date), be sure to contact the IRS at the number listed on your notice. Keep in mind that failure to respond by the specific date may jeopardize your appeal rights if you disagree with the changes made to your return or the amount owed.
- Pay Your Balance – If this is a collections notice, you’ll need to submit payment in full by the deadline date to avoid additional interest and fees. You can also apply for a payment plan or other tax relief if needed.
Do not ignore your notice! Doing so will put you at risk for wage garnishment, tax liens, and levies. The IRS will use whatever means available to collect the debt.
If you need help determining your next steps or want to know which tax relief programs are available to you, contact Tax Defense Network at 855-476-6920. We offer a free, no-obligation tax consultation.