An envelope from the IRS lands in your mailbox. Your stomach drops. Most people's first instinct is to either ignore it or panic — and both of those reactions can make the situation much worse.
Here's a calm, step-by-step guide to handling IRS notices effectively.
Step 1: Open It (Yes, Right Now)
Every IRS notice has a response deadline. Most are 30 days. Letting the envelope sit on the kitchen counter for two weeks burns half of your response window. Open it the day it arrives.
Step 2: Identify the Notice Type
Look at the top right corner of the letter. Every IRS notice has a number that starts with "CP" (Computer Paragraph) or "LTR" (Letter). The most common ones:
CP2000 — "Underreporter"
The IRS thinks you didn't report all your income. Usually they got a 1099 or W-2 that doesn't match your return. NOT an audit — just a request for clarification or payment.
Severity: Medium. Often resolved by responding with documentation.
CP14 — "Balance Due"
You owe taxes. This is the IRS's first attempt to collect.
Severity: Medium. Pay if you can. If you can't, set up a payment plan.
CP501 / CP503 / CP504 — "Reminder Notices"
Escalating reminders that you owe taxes. CP504 is the last one before the IRS files a tax lien against you.
Severity: High and rising. Don't ignore.
LT11 / LT16 — "Final Notice of Intent to Levy"
The IRS is about to seize bank accounts, garnish wages, or place liens on property. You have 30 days to respond or appeal.
Severity: Critical. Call a CPA today.
CP90 — "Notice of Levy"
The IRS has already started the levy process. Time is essentially gone.
Severity: Critical. Call a CPA today.
Letter 525 / 692 — "30-Day Letter"
The IRS has finished an examination and is proposing changes to your return. You have 30 days to agree or file a protest.
Severity: High. Don't agree without consulting a CPA.
Letter 3219 — "Statutory Notice of Deficiency"
Also called a "90-day letter." This is your last chance to dispute proposed changes in Tax Court before the IRS assesses additional tax.
Severity: Critical. Tax Court has strict deadlines.
CP12 / CP21 — "Math Error / Adjustment"
The IRS corrected a math error on your return. May result in a smaller refund or unexpected balance due.
Severity: Low to medium. Usually just informational.
Step 3: Verify It's Actually From the IRS
Tax scams using fake IRS notices are common. Real IRS notices:
- Come by U.S. mail (the IRS does NOT initiate contact by phone, email, or text)
- Have a notice number in the top right
- Reference a specific tax year
- Provide a way to verify by calling the IRS at 1-800-829-1040
- Do NOT demand specific payment methods (gift cards, wire transfers)
- Do NOT threaten immediate arrest
If something feels off, call the IRS at 1-800-829-1040 to verify before doing anything.
Step 4: Read Carefully, Don't Skim
Notices are written in dense language but the response instructions are usually clear. Look specifically for:
- The response deadline (in big bold type, usually)
- What the IRS believes is wrong
- Specific actions they want from you
- Phone number and IRS reference number for the notice
- Whether you can respond by mail, fax, or online
Step 5: Decide if You Need a CPA
You can usually handle yourself: CP12 (math error), CP14 (balance due you can pay), simple CP2000 with clear documentation.
Get a CPA involved: Any audit notice, any "30-day" or "90-day" letter, levy notices, large balance you can't pay, anything you don't fully understand.
The cost of a CPA's hour is much less than the cost of mishandling a serious notice.
Step 6: Respond on Time
If you respond by the deadline, you have rights. If you miss the deadline, your options shrink dramatically. Even if you need more time, contact the IRS to request an extension before the deadline passes.
If You Owe Money You Can't Pay
The IRS WILL work with you. Options include:
- Short-term payment plan (up to 180 days, no fee)
- Installment agreement (up to 72 months, small setup fee)
- Offer in Compromise (settling for less than owed — strict qualifications)
- Currently Not Collectible status (temporary halt to collection if you can prove hardship)
The worst thing you can do is not respond at all.
Common Mistakes
- Ignoring the notice. Penalties and interest compound. Tax liens follow.
- Calling the IRS when emotional. Have your facts ready and stay calm. The agent is a person doing their job.
- Sending payment without keeping copies. Always keep proof of every check, every letter, every payment.
- Agreeing to changes you don't understand. If a notice proposes changes, get a CPA to review before signing anything.
- Missing the response deadline. Even by one day, you can lose appeal rights.
Got a Notice? Bring it to Pamela
Most IRS notices are resolvable — but the right response matters. Pamela Beaton, CPA represents clients with the IRS, drafts responses, and negotiates payment plans. Call before the deadline.
Call 360-435-3440