List of Common IRS Notices and What They Mean

An IRS notice is a formal, written correspondence from the agency regarding your tax account or a specific tax return you filed. These are the primary way the IRS communicates with taxpayers about a wide range of issues. Notices are sent for numerous reasons and do not automatically signify an audit. Some are purely informational, while others might alert you to a change in your refund amount, propose changes to your tax liability, or request that you verify your identity.

How to Read an IRS Notice

When you receive a notice from the IRS, knowing how to navigate the document is the first step toward resolving the issue. These letters follow a standardized format designed to convey specific information clearly. Understanding the layout can help you identify the core message and the required next steps.

Finding the Notice Number and Date

In the top right-hand corner, you will find a notice number, such as “CP14.” This code identifies the issue, and you can use it to find more information on the IRS website. The notice date is also located here, which starts the timeline for any response deadlines.

Identifying the Tax Year in Question

Every notice pertains to a specific tax period, which is displayed near the top of the letter. Verifying the tax year ensures you are reviewing the correct tax return and records when preparing a response.

The Summary Section

Notices include a summary section on the first page that explains why the IRS is contacting you. This area will state the main issue, such as a proposed change to your tax, a balance due, or a question about your return.

Response Deadline

If the notice requires action, it will specify a response deadline. Failing to respond by this date can lead to additional interest and penalties or limit your appeal rights. The notice will also provide the specific address or fax number for your reply.

Common IRS Notices and What They Mean

IRS notices address a variety of issues, and understanding the purpose of the specific notice you received is key to a proper response. These communications can be grouped by their function, whether they are informing you of a balance due, questioning information on your return, or requesting verification. Each category and the specific notices within it have distinct implications.

Notices About a Balance Due

This category indicates that the IRS records show you owe taxes. The most common is the CP14, “Balance Due, No Math Error,” which is the first bill sent for an unpaid balance on a filed return. It details the tax, penalties, and interest owed and provides a payment due date.

If the balance remains unpaid, the IRS sends reminder notices like the CP501 and CP503. The urgency increases with the CP504, a “Notice of Intent to Levy,” which warns that the IRS can seize your state tax refund to satisfy the debt.

Notices About Return Discrepancies

Some notices propose changes to your return based on conflicting information. The most frequent is the CP2000, or “Underreporter Inquiry,” which is generated when income reported by third parties, like employers or banks, does not match the income on your tax return. This notice is a proposal to adjust your return, not a bill, and you have the right to agree or disagree.

Other notices may point out simpler issues, such as mathematical errors. The IRS corrects these errors automatically and sends a notice explaining the adjustment and any change to your tax or refund.

Notices Requesting Information or Verification

The IRS may need more information to process your return, which can hold your refund. A CP05 notice informs you that your refund is frozen while the IRS verifies items like income, withholding, or credits, a review that can take up to 60 days.

The IRS also sends letters to combat identity theft. If a return is flagged, you may receive a notice asking you to verify your identity online or by phone to confirm you filed the return.

General Informational Notices

Some notices are purely informational and do not require a response. A common example is a notice about a refund offset. This is when the Treasury Offset Program uses your federal tax refund to pay other outstanding debts, such as past-due child support or other federal agency non-tax debts.

Information and Documents Needed to Respond

After understanding the notice you received, the next step is to gather the necessary information and documents to formulate a response. The specific items you need will depend on whether you agree or disagree with the IRS’s assessment. Proper preparation is fundamental to resolving the matter efficiently.

If you agree with the notice, the process is straightforward. You will need the payment voucher or response form included with the notice. If there is a balance due, you will need your payment information. Always keep a copy of the notice and proof of payment for your records.

If you disagree with the notice, you must gather documents to support your position. Start with your copy of the tax return for the year in question. Next, assemble all supporting documentation for the disputed items. This could include:

• W-2s from employers or Form 1099s from banks or brokerage firms
• Receipts for charitable contributions or medical bills
• Mileage logs for business vehicle use
• Bank statements showing relevant transactions

You should also prepare a detailed letter explaining why you disagree and referencing your supporting documents.

How to Formally Respond to the IRS

Once you have gathered all the necessary documents, you must submit your response in a formal manner. The method of submission and the contents of your response package are important for ensuring the IRS processes your information correctly. Pay careful attention to the instructions provided in the notice.

The most common way to respond is by mail. Your package should include the response stub from the notice, your letter of explanation if you disagree, and copies of all supporting documents. Sending your response via certified mail with a return receipt is recommended for proof of delivery.

Some notices allow you to respond online or by fax, and will provide the web address or fax number. Always send copies of your documents, not the originals, and keep the originals for your files.

After submitting your response, the IRS may take 30 to 60 days to review it and issue a follow-up letter. This letter will either accept your explanation and close the case or explain why the agency still disagrees, outlining your appeal rights. Keep a complete copy of everything you sent to the IRS for your records.