How to Respond to an IRS Notice Letter (or IRS Notice of Deficiency)

Estimated reading time: 4 minutes.

You have received an IRS Notice letter in the mail. On its front are stamped the letters “IRS.” The pit of your stomach drops and this once innocuous envelope now holds your full attention. What do you do next?

Open Your IRS Letter

First, open it. It may not be the worst that you are no doubt assuming it may be. It is incredible how many people simply throw out IRS notices, thinking that if they “didn’t receive them” then they would be somehow absolved from any tax liability. This is never true and will only worsen your situation should it prove serious.

Most Common IRS Notices

Proposed Adjustment – IRS Notice CP2000

Sometimes, what you report on your tax return does not add up to what the IRS has in its records. A miscalculation is made as to the taxes due. When the discrepancy is discovered, a notice, typically a CP2000, is sent out to inform the taxpayer of the proposed adjustment. Often, this is in the IRS’s favor but it can also be in the favor or the taxpayer as well.

A notebook reading "Tax, economy, refund, money," a cup of coffee, glasses, a tax form, and a calculator

Tax Return Processing or Request for Additional Information – IRS Notice CP2501

Probably the most common form of IRS notice is one that notifies you that your tax return is being processed or that additional information or clarification is needed to complete the processing of your return. There are many specific letters, like the CP2501 notice, but many require little to no action on your part with others needing only additional information such as a letter of explanation, additional income information, and the like.

Notice of Refund

The best kind of letter from the IRS is one with a check in it. You’ve overpaid your taxes. The IRS processes your return without issue and the remaining balance is sent to you. Few things are as good as receiving money back from the federal government.

More Serious IRS Notice Letters

Notice of Tax Examination: IRS Letter 2205-A

This notice means your taxes are being examined. This letter will include contact information for the IRS agent handling your case. This can be a precursor to a full tax audit.

IRS Notice of Deficiency Letter – IRS Form CP3219A/N

This notice (Form CP3219A/N) informs the taxpayer that either there has been an increase in the amount of tax due to the IRS or no tax return was received. This judgment is determined after your appeal or 30 days after non-response. After receiving this IRS notice of deficiency, you have 90 days to petition the tax court.

Final Notice With Intent to Levy – IRS Form 1058

The IRS has made you aware of due tax and you have not paid. This tax becomes delinquent and the IRS puts in motion the steps necessary to retrieve the tax due to it. This can mean taking money from your state refund, bank accounts, or even your property and other assets.

Do Not Ignore Any IRS Notice

The worst thing you can do with any IRS notice is to ignore it. Once a notice is sent, the clock starts ticking.

Timing is critical. There are deadlines associated with nearly all IRS notices. Also, with deficiencies, bank levies, or other collections, there are often fees, late penalties, and interest accrued the longer you wait to act.

Take Action: Respond & Consider Getting Professional Help

Whether you plan to handle everything yourself or hire a professional to address your IRS notice on your behalf, immediate action is key. Deadlines for appeals, replies and petitions can all have very big and irreversible consequences on your taxes.

Respond to Your Tax Notice Yourself

Respond to your IRS notice as soon as possible. If you do not understand your notice, research it on or call your IRS agent in cases where agent contact information is provided with your notice.

Talk to Boxelder Consulting.  We’re a Tax Resolution Firm!

In situations where your bank account is in danger of being levied, your taxes are being audited, or other serious tax scenarios, hiring a professional to represent you is critical.  Contact us using the form in the sidebar of this post and we’ll help you out.

The key with any tax issue is calm and collected action. Understand what your situation, make a plan, and move forward with steps to resolve your issue. Do not waste time with worry or delay progress out of fear for what might happen.

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About the Author

A company founder standing by a mountain range

Dave Weishaus

Co-Founder, Tax Advisor, Business Consultant

Dave Weishaus, co-founder of Boxelder Consulting and Tax Relief, has over 20 years of small business consulting and tax advisory experience. He has a law degree from the University of Baltimore and completed undergrad from Johns Hopkins University with a focus on International Business and East Asian Studies. Now, Dave specializes in financial consulting, tax planning, and general administrative services. Dave’s favorite part of working at Boxelder Consulting is working with start-ups and sharing in the excitement of launching a new venture. Dave is the proud father of Moses, a gentle 200lb St. Bernard.

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