What Does It Mean When the IRS Sends You a Letter?

Receiving a letter from the Internal Revenue Service (IRS) can often cause immediate concern for taxpayers. However, these communications are a common part of tax administration and do not always indicate a serious problem. The IRS frequently sends letters to address routine matters, provide information, or clarify details related to tax accounts or returns. Understanding the nature of these letters and how to approach them can help alleviate anxiety and ensure proper resolution.

Common Reasons for IRS Letters

The IRS sends letters for various reasons, often to address discrepancies or provide updates. One frequent cause is missing information on a tax return, where the IRS may need clarification or additional documents to process a return accurately. Similarly, mathematical errors on a filed return can trigger a letter, such as a CP11 notice, explaining the correction and its impact on the tax liability or refund.

Many letters concern a balance due, indicating additional tax, penalties, or interest owed. A common example is the CP14 notice, which informs taxpayers of an unpaid balance and provides instructions for payment. In other instances, a letter might relate to refund inquiries, explaining adjustments to a refund amount or delays in its processing, sometimes due to identity verification or missing information.

Audit notices, such as Letter 566 or LTR 2205, inform taxpayers their return has been selected for examination, which might involve a correspondence audit by mail. Identity verification requests, like Letter CP5071, confirm a taxpayer’s identity before processing a return to prevent fraud. Unreported income, identified when third-party reports don’t match a tax return, can lead to a CP2000 notice proposing adjustments. Finally, changes to tax law affecting a taxpayer’s return or delays in processing can also prompt a letter from the IRS.

Understanding Your IRS Letter

Understanding an IRS letter’s components is key to determining the appropriate response. Every official IRS letter includes a notice number (CP for computer-generated, LTR for letters), usually found in the upper or lower right-hand corner. This number is important for identifying the specific type of communication and can be used to find more information on the IRS website.

The letter’s date is another significant detail, as it often marks the beginning of a response period. Most IRS notices specify a deadline by which the taxpayer must respond, which can range from 30 to 90 days, depending on the notice’s nature. Failing to meet this deadline can result in penalties or a forfeiture of appeal rights.

The letter provides contact information, including a phone number or mailing address, for inquiries or responses. A summary of changes or issues details the specific problem the IRS has identified or the adjustments made to the tax account. This section explains how the issue affects the taxpayer’s balance or refund. Finally, the letter will clearly state the required action, whether it involves paying a balance, providing additional documentation, or agreeing or disagreeing with the IRS’s findings.

Steps to Take After Receiving a Letter

Upon receiving an IRS letter, remain calm. Carefully read the entire letter, as important details are often spread throughout. Identify the notice number (CP or LTR) and the date of the letter, as these are crucial for understanding the communication’s context and any applicable deadlines.

Next, determine the response deadline specified in the letter. Most IRS notices require a response within 30 days, although some may allow 60 or 90 days. Adhere to this timeframe to avoid further penalties or collection actions. Gather all relevant documents that pertain to the issue mentioned in the letter, such as copies of tax returns, receipts, bank statements, or other financial records.

If a response is required, prepare it thoroughly and submit it by the deadline. Always keep copies of everything sent to and received from the IRS. This includes the original letter, any documents sent, and a record of the mailing date. Ignoring an IRS letter can lead to serious consequences, including additional interest and penalties, potential enforcement actions like a tax lien, or even levies on bank accounts or wages.

Resources for Assistance

Taxpayers who need help understanding or responding to an IRS letter have several resources available. The official IRS website offers information, allowing taxpayers to search for specific notice numbers to find explanations and guidance. The IRS also provides phone numbers for direct assistance.

For personalized support, various tax professionals can assist. Certified Public Accountants (CPAs) are licensed accounting professionals who can help prepare tax returns and represent taxpayers before the IRS. Enrolled Agents (EAs) are federally licensed tax practitioners authorized to represent taxpayers before the IRS in all tax matters. Tax attorneys, who are licensed lawyers specializing in tax law, can provide legal advice and representation, particularly in complex tax disputes or audits.

Low Income Taxpayer Clinics (LITCs)

Low Income Taxpayer Clinics (LITCs) offer free or low-cost assistance to individuals who meet specific income guidelines and have a tax dispute with the IRS. These clinics can represent taxpayers in audits, appeals, and collection matters.

Taxpayer Advocate Service (TAS)

The Taxpayer Advocate Service (TAS), an independent IRS organization, helps taxpayers resolve problems when normal IRS channels fail or when an IRS action causes significant financial hardship. Taxpayers can contact TAS if they have tried to resolve an issue directly with the IRS without success or if an IRS action is causing economic harm.