IRS Letters & Notices: What You Need to Know

The IRS sends out millions of letters every year to taxpayers throughout the United States. The news in these letters can either be good or bad. In either case, you should not worry. There are resources available to help you. Your best course of action is to respond promptly if necessary.

The only mail you hope to get from the IRS is your refund check. However, there may be bad news in the mail from the IRS as well. Here’s what you need to know about IRS letters and notices.

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Why did the IRS send me a letter?

The first thing you think of when you receive a letter from the IRS is that you're being audited, but this isn't always the case.

For example, the IRS may inform you that:

• You owe the IRS money
• The tax return you filed needed to be corrected
• There is a delay with your tax return
• The IRS has a question about your tax return
• You may not get the refund you expected
• Your identity must be verified by the IRS

Any letter you receive should be opened and read calmly. Good or bad news, tax professionals can help make sense of it and take prompt action.

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Common IRS Letters and Notices

The top or bottom right-hand corner of every letter or notice (at least the legitimate ones) should include a code. On your correspondence, you can find the notice number (CP) or letter number (LTR) either at the top or bottom.

Here are the most common IRS notices and letters, what they mean, and what you need to do if you receive one.

CP12

What does it mean?: There were mistakes on your tax return. They have been corrected, and an overpayment has been identified.

What should I do?: Compare the changes to your tax return, update the return in your records, and contact the IRS within 60 days.

CP501

What does it mean?: You have a balance due.

What should I do?: Call the IRS if you disagree with the balance. Set up a payment agreement with the IRS.

CP2000

What does it mean?: The income or payment information on your tax return does not match up.

What should I do?: Complete the response form per the instructions, and contact the information provider.

LTR3172

What does it mean?: A federal tax lien has been filed against you. You have rights to a hearing.

What should I do?: Contact a tax professional ASAP. Complete form 4089 (Notice of Deficiency Waiver), mail additional information, challenge the lien, or return with payment.

What do I do after I receive a letter from the IRS?

Letters from the IRS can be positive or negative. Reading the letter calmly, checking that it isn't a scam, and responding accordingly is the best course of action. Avoid unnecessary penalties and payments by resolving any issues with the IRS promptly.

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1. Make Sure The Letter Is Not a Scam

First, you need to make sure you are not being scammed. Scammers know people tend to send out sensitive information if they are frightened and think it's the IRS. Avoid sending sensitive information to unknown sources.

Whenever the tone of the correspondence is angry or if it uses scare tactics such as threatening you with arrest or demanding payments without allowing you to appeal or ask questions, it is a scam. Letters from the IRS are objective in tone, not emotional.

If the letter asks for specific payment information via mail or telephone, it's a scam. Fraudsters try to get credit card or debit card information in this way. Additionally, the IRS does not communicate via text, email, or social media. Such communication is almost always fraudulent.

If you're unsure whether the IRS letter you received is legitimate, call them at their official number - (800) 829-1040. An IRS representative will help you determine the source of the letter.

2. Take Action

After reading the letter carefully, it's time to take action. It may be necessary to respond by a certain date. By meeting his deadline, you will avoid any penalties and preserve your right to appeal. A response is not required unless the letter explicitly asks for one.

You should:

• Follow any instructions contained in the letter
• If you owe money, then pay it. You can apply for an Offer in Compromise or Online Payment Agreement if you cannot pay
• Make sure you keep a copy of the letter for your records
• If you have further questions about the letter, contact the IRS. The agency's phone number is located in the right-hand corner of the letter

In the event that you don't agree with the notice, you still need to respond. Write a letter to explain your disagreement. Include all the information and documents you wish to be considered by the IRS. Attach the bottom tearoff portion of your letter with your reply. You must send it to the address shown on the notice's upper left corner. Expect a reply within 30 days.

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What is IRS certified mail?

US Postal Service delivers mail to millions of Americans for the IRS. There are times when the mail is particularly time-sensitive or important, but it isn’t always delivered. A certified letter will be sent by the IRS if problems are not resolved.

Certified mail from the IRS contains the following information:

• Mailing receipt:  A certified mailing comes with a mailing receipt for the sender, in this case, the IRS. In order to ensure delivery of the intended recipient, this mailing receipt is the first step in the tracking process.
• Signature requirement:  a certified letter cannot be left in the mailbox. As proof of delivery, a signature is required, and the letter will be returned if the intended recipient does not accept it.
• Electronic delivery: IRS certified mail includes electronic delivery tracking. Information can be viewed online or over the phone.

The IRS generally only issues certified letters as the last resort. As soon as someone starts receiving certified mail from the IRS, the IRS will be expecting a response. Not responding could result in serious consequences.

What are the reasons for certified mail from the IRS?

For the IRS, certified mail is a form of advance notification that begins the ticking timer for when important action may be taken, usually after the taxpayer has exhausted their right to appeal, and the IRS wants the assurance of proof that certified mail can provide. Listed below are some of the most common reasons why you received a certificate from the IRS.

An IRS Notice of Deficiency

Audits are conducted by the IRS and they send you a certified letter called a notice of deficiency. According to the IRS, this notice is a certified one because the IRS must wait 90 days (150 days if you live outside the United States) before assessing the additional tax that the IRS claims you should pay.

If you disagree with the IRS notice, you must file a petition with Tax Court to contest it before the 90th day has passed. For proof and tracking, it is advisable to send the petition by certified mail.

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Notice of the Filing of a Federal Tax Lien

A tax audit, a penalty assessment, or a tax return with a balance due have all resulted in you owing the IRS. If you received this letter, the lien has already been filed. Since the IRS is statutorily required to give you notice by certified mail or in person within five days after it filed this notice, it is certified by the IRS.

A collection due process hearing can be requested if you disagree with the IRS. However, you have no more than 35 days from the date of the lien filing to file your protest. For proof, it is advisable to send the collection due process hearing by certified mail.

Notice of Intent to Levy

In the same way as the lien notice, you owe tax to the IRS after an audit, a penalty assessment, or when you file a tax return with a balance due. As opposed to the lien notice, however, no levy had been issued by the IRS at the time of the certified mail.

Levy notices are sent by certified mail in two forms, a CP504 (which enables refunds to be seized) and a LT11, which is the final notice of intent to levy. In order to serve a levy on a bank, your clients, or your wages, the IRS must give you notice 30 days in advance by certified mail.

You also have 30 days from the date the notice was mailed to request a hearing if you think the IRS is wrong. If an address is provided in the notice, it is advisable to send a certified mail notice of the collection due process hearing.

 Helpful resource: What is a tax levy?

Notice of Determination Concerning Collection Action

You filed a protest against the lien or levy notices outlined above and the IRS Office of Appeals has completed its collection due process hearing and sent you its decision.

The IRS is required to send you this certified letter to give you 30 days to protest this decision by filing a petition with the Tax Court, after which the IRS can resume enforcement if no Tax Court petition is filed.

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IRS Letter Scams to Look Out For

Scammers realize the threat of the IRS will motivate people to disclose sensitive information.

Knowing that IRS agents won't email you or send you a social media message can help you spot a scam that uses these methods. However, when you receive a letter or telephone call, it could be more difficult to distinguish between real and fake.

You should not respond to requests for personal or financial information via email or social media.

Do not disclose any information to anyone who calls you demanding immediate payment for your tax bill. It is common for these callers to use fake IRS identification numbers to make you believe they are legitimate when they are actually scammers.

You can call the IRS at 1-800-829-1040 if you're not sure whether the letter you received is legitimate.

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Work With an Experienced Profession to Meet The IRS Request

There is no need to panic if you receive a letter from the IRS. Follow the instructions in the letter after reading it carefully and verifying that it is from the IRS. With an accurate and timely response, you can resolve issues with the least amount of stress.

Getting help from a tax professional can be a great idea if you have questions or aren't sure exactly how to meet the IRS's demands. Tax professionals can assist with IRS tax audits, foreign disclosures, and a wide range of IRS tax problems.