It’s important to be aware of different types of IRS notices that may be sent to your clients. These letters can understandably cause quite a bit of stress for the recipient. Any notice or letter will include the form/notice number and contact information for the IRS at the top or right-hand corner of the correspondence. We’ve put together a run down of the most commonly received notices and what they mean.
CP2000 - Notice of Proposed Adjustment
The CP2000 notice is one of the most common notices distributed by the IRS. This notice is generated if there is a difference between what the taxpayer reported on the tax return versus what was reported to the IRS by an employer/bank/other payer. This type of notice could even result in a refund depending on the error on the return. This notice is not a bill, just a letter that informs the taxpayer of the adjustment being made on the return. The notice will break down what was originally reported and the proposed adjustments by the IRS.
IRS Notice CP14 is a notice of balance due. Your client will get a CP14 notice if the IRS believes that your client didn’t pay all the taxes they owe. The notice informs your client of the balance now due, including penalties and interest due on the unpaid balance.
CP2501 - Tax Return Discrepancy
This IRS notice requests clarification from the taxpayer regarding information on their tax return that doesn’t match information the IRS has on file. The taxpayer should contact the IRS immediately to explain the difference and correct the return. The notice deadline is usually 30 days from the date on the notice.
Letter 2205 - Return Selected for Examination
Letter 2205-A is for individual taxpayers and Letter 2205-B is for business taxpayers. The IRS uses this notice to inform a taxpayer that they have been selected for an audit. The notice includes the examiner's name, phone, and office location. The notice will inform the taxpayer of what issues are being reviewed and which documents are being requested. The notice may request a meeting with the taxpayer and the examiner.
Letter 525 - Examination Report
This letter informs the taxpayer that changes have been proposed due to an IRS examination. After a taxpayer has been selected for an audit, the IRS may propose additional tax based on their examination. The taxpayer has a 30-day period to dispute this proposed change.
Letter 3219 - Notice of Deficiency
The IRS sends this notice when they have determined that a taxpayer underpaid and owes tax on their return. The IRS Notice of Deficiency will show exactly the amount due to the IRS. The taxpayer has a 90-day period where they can petition the determination to the Tax Court. If the taxpayer agrees with the changes, then they will have to send the full balance due along with a sign Form 5564 (Notice of Deficiency Waiver) to the IRS.
Letter 12C - Information Request
This IRS notice is sent out when additional information is needed by the IRS in order to process a tax return. The missing information could be a signature, form, verification of income, etc. This notice provides a fax number so the taxpayer can respond in a timely manner to the IRS. If the information needs to be sent by mail then the taxpayer should ensure that it is sent by certified mail as a proof of mailing.
CP 90 - Final Notice of Intent to Levy
This IRS notice reminds the taxpayer of their unpaid taxes and informs them that the IRS intends to levy the taxpayer. If the taxpayer wants to appeal this determination, they will need to file Form 12153, Request for Collection Due Process Hearing, within 30 days of the date on their notice.
CP01 - Identity Theft
This IRS notice is sent to a taxpayer when the IRS has put an identity theft indicator on their account. This is an informational notice that simply informs the taxpayer that the IRS will monitor their account for activity to prevent future fraud. This notice does not require an additional action from the taxpayer.
Letter 3391 - 30-day Non-filer Letter
This letter is sent to a taxpayer when the IRS determines that they are missing tax returns for certain years. The IRS will include a computation of the proposed amount due for the tax year that is missing a federal return. The taxpayer will have 30 days to appeal this notice or sign the agreement form and return it to the IRS.
The best way to respond to these notices is to get in contact with the IRS sooner rather than later. Ignoring the letters will make the situation worse. If a notice that requires a taxpayer’s response is ignored, the IRS could issue a tax lien or tax levy on the taxpayer’s account.
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