Why Would I Get a Letter From the IRS?

Receiving a letter from the Internal Revenue Service (IRS) is a common occurrence, with the IRS sending millions of notices annually. Most communications are routine or relate to standard tax matters. This article clarifies why these letters are sent and what actions to consider upon receiving one.

Reasons for IRS Letters

The IRS sends letters for various reasons, often stemming from discrepancies or specific needs related to your tax account or return. One frequent reason involves information mismatches, where data reported by third parties, such as employers or financial institutions, does not align with what you reported on your tax return. This can occur with W-2 forms for wages, 1099 forms for various types of income, or other investment income statements. The IRS uses an automated system to compare these reported amounts with your filed return.

Another common scenario is unreported income, where the IRS has received information about income you earned that was not included on your tax return. For instance, if you received a 1099-NEC for nonemployee compensation but did not report it, this could trigger a letter. These notices propose changes to your tax return based on the missing income.

Letters are also sent if you have a tax due or underpayment of estimated taxes. This might be due to an error on your return, insufficient withholding from your pay, or not paying enough estimated tax throughout the year. The notice will outline the amount owed, including any interest or penalties. If the IRS made an adjustment to your return based on information they have, they will send a letter to explain the changes.

In some instances, the IRS might send a letter because your return has been selected for an audit or examination. An audit letter typically requests additional documentation to verify claims made on your tax return, such as dependents, deductions, or credits. The IRS also sends letters for identity verification or fraud prevention, especially if they suspect a tax return filed with your Social Security number might be fraudulent. These letters require you to confirm your identity before they process a refund or return. Finally, the IRS may need missing information or believe you were required to file but did not, sending a notice to request the necessary details or inquire about an unfiled return.

Deciphering Your IRS Letter

Upon receiving an IRS letter, your first step should be to carefully examine its contents to understand its purpose. It is important to distinguish a legitimate IRS communication from a scam. Authentic IRS letters arrive via U.S. mail and feature official IRS letterhead, including the U.S. Department of the Treasury logo. They contain specific details like your correct name, address, and a unique notice or letter number.

Scam letters, in contrast, often contain grammatical errors, misspellings, or unusual formatting. They may demand immediate payment through unconventional methods like gift cards or wire transfers, or threaten immediate arrest or legal action, which the IRS does not do in initial communications. If you are unsure about a letter’s authenticity, you can call the official IRS helpline at 800-829-1040 to verify its legitimacy.

Once you confirm the letter is authentic, locate the notice or letter number, as this code identifies the specific reason for the correspondence. You should also identify the tax year the letter pertains to, which is usually located near the top of the document. The letter will clearly state the reason for the correspondence, such as proposed changes to your tax return or a request for additional information. It will also outline what action the IRS expects you to take. The response deadline is important, as missing it can lead to further complications, including penalties and interest.

Steps to Take After Receiving an IRS Letter

After reading your IRS letter, the next steps focus on a timely, appropriate response. Begin by gathering all relevant tax records and documents that pertain to the tax year and specific issue mentioned in the letter, such as copies of your tax return, W-2s, 1099s, receipts, and bank statements.

Next, consider your options for responding. You can agree with the IRS’s findings, disagree and provide supporting documentation, or, in some cases, request more time to respond. If you agree with the proposed changes or balance due, follow the instructions to make a payment or accept the adjustment. If you disagree, prepare a detailed written response explaining your position and include copies of any documents that support your claim. Always send your response via certified mail with a return receipt, and keep copies of everything you send and receive for your records.

If the letter instructs you to call the IRS, have the notice and all relevant documents ready before making the call. For complex issues, audits, or if you are unsure how to properly respond, seeking assistance from a qualified tax professional is advisable. They can review the notice, help prepare your response, and represent you if necessary. If the letter indicates a balance due, the IRS offers various payment options, including installment agreements, which can be explored even if you cannot pay the full amount immediately. Ignoring an IRS letter can lead to escalating penalties, interest charges, and potential enforcement actions.