IRS Notice Response Guide: What to Do When the IRS Contacts You

Few things are as unsettling as opening your mailbox and seeing a letter from the IRS. For many taxpayers, the first reaction is panic. The truth is, not every IRS notice means trouble. Some are simply informational, while others do require action. Knowing how to respond and when to seek help can make all the difference between a quick resolution and a costly mistake.

Why the IRS Sends Notices

The IRS issues more than 200 different types of notices and letters, each with a different code and purpose. The most common categories include:

• Balance Due (CP14, CP501, CP503, CP504): You owe tax, penalties, or interest. These can escalate to collection actions if ignored.

• Information Mismatch (CP2000): The IRS records such as 1099s, W-2s, or brokerage statements do not match what you reported.

• Math Errors or Adjustments (Notice CP11 or CP12): The IRS adjusted your return for a computational or clerical error.

• Audit or Examination Letters (Letter 566, Letter 2205, etc.): The IRS is requesting more detail or formally opening an audit.

• Identity Verification (Letter 5071C): The IRS needs confirmation that you actually filed the return.

• Collection Notices (LT11, Letter 1058): Final notices before enforced collection such as levies or liens.

Pro Tip: The notice number is usually in the top right corner. Always reference it when speaking with the IRS or your tax professional.

Common Mistakes Taxpayers Make

When faced with an IRS letter, many taxpayers unintentionally make things worse:

1. Ignoring the notice and hoping it will go away. This only adds penalties and interest and can forfeit certain appeal rights.

2. Paying without review. The IRS is not always correct and mistakes happen.

3. Sending incomplete responses or mailing them to the wrong address.

4. Speaking directly to the IRS without representation. You might say something that harms your case.

5. Failing to track deadlines. IRS notices contain strict response dates. Missing them can permanently close doors to resolution.

IRS Notice Response: Steps to Take Immediately

1. Read the notice carefully. Identify the tax year, the issue, and what action is required. Not all letters demand payment.

2. Check accuracy. Compare the IRS claim against your filed return, W-2s, 1099s, and bank or brokerage records.

3. Gather documentation. For example, if the IRS says you underreported income, collect the source documents that prove otherwise.

4. Note the deadlines. Most notices give 30 days to respond. Audit or deficiency notices (90-day letters) carry strict timelines for Tax Court petitions.

5. Seek professional advice early. An Enrolled Agent, CPA, or tax attorney can clarify your options and represent you directly before the IRS.

Example Scenarios

• Mismatch Notice (CP2000): The IRS says you failed to report a $10,000 1099-INT. You discover that income was actually reported under your spouse’s SSN on a joint return. A proper response with documentation can resolve it without paying twice.

• Audit Letter: A small business owner deducted $15,000 in vehicle expenses. The IRS questions it. With mileage logs, insurance records, and depreciation schedules, the deduction can often be substantiated or negotiated.

• Collection Notice: A taxpayer owes $25,000. Instead of risking levies, they work with a representative to secure an installment agreement or possibly an Offer in Compromise if they qualify.

How Professional Representation Protects You

When you bring in a qualified representative:

• You do not have to speak directly with IRS agents. All communication flows through your representative.

• Your rights are preserved. A professional knows when you can appeal, request penalty relief, or push back against improper adjustments.

• Errors are caught, such as misapplied payments or overlooked deductions.

• Resolution options are maximized. From installment agreements to penalty abatement, there are often more solutions than the IRS will tell you about.

This process is often referred to as IRS tax resolution, the negotiation and resolution of disputes with the IRS on your behalf. At Vital Tax & Advisory Group, we represent clients through all phases of IRS audits and controversies, from the first notice through appeals. As part of our commitment, we include free audit representation for any return we prepare. That means if the IRS ever comes knocking, you will not have to face them alone.

Final Thought

Receiving an IRS notice does not always mean you did something wrong. It could mean the IRS has a question, a claim, or there was a mismatch. How you respond will determine the outcome. With the right guidance, even complex tax controversies can be resolved smoothly.

If you have received an IRS notice and are not sure what to do next, contact us today. We will review your situation and guide you from notice to resolution.