How to Handle IRS Notices with Confidence and Clarity

Receiving an envelope from the Internal Revenue Service with your mail can bring about an instant sense of dread. Even the most organized individuals who have maintained impeccable records can feel that gut-wrenching jolt of anxiety when encountering an IRS notice.

However, there is some good news:
Most IRS communications are not emergencies.
Many are part of routine checks.
Almost all can be addressed methodically with understanding and preparation.

Before you spend a sleepless night worrying, take a deep breath. Then follow the right steps to resolution.

Why the IRS Dispatches Notices

Each year, the IRS sends millions of notices, which typically fall into these categories:

Discrepancy Notice
This happens when there’s a mismatch between what the IRS received, such as a 1099 or W-2, and what was reported on your return, prompting an automatic notice rather than an accusation of wrongdoing.
Request for Additional Details
When a figure isn’t clear, a form is missing, or a minor math error occurs, the IRS may need further information. These cases usually involve minor issues.
Payment Issue
Whether due to a misapplied payment, a late posting, or a mismatch with your return, payment errors can prompt notices.
Adjustments on IRS's Side
This is about corrections in refunds, credits, or deductions.
Identity Verification
Due to enhanced identity theft protections, the IRS may ask you to verify your identity. Most of the time, this is precautionary.

The Critical Importance of Consulting a Professional First

The biggest mistake taxpayers make is rushing to respond without professional advice.

You might be tempted to:

Agree to pay the stated amount
Immediately call the IRS
Send documents devoid of context
Ignore the notice in hopes it resolves itself

These reactions often compound the issue.

While the IRS letter might seem daunting, consulting with your financial advisor beforehand can provide clarity.

They will determine if the notice is accurate.
Confirm your actual liability.
Identify potential IRS errors.
Advise if the situation needs simple clarifications or professional representation.
Guide what documentation, if any, is necessary to provide.
Whether or not a response is necessary.

You should never navigate these waters alone.

Decoding IRS Notice Codes

Each notice bears a specific code like CP2000, CP14, or CP75, which succinctly identifies the nature of the correspondence.

CP2000 — Underreported Income

This common notice indicates the IRS believes you reported less than your actual income. It doesn’t mean negligence; often, it results from late or incorrect form submissions by payers.

CP14 — Balance Due

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This notice reflects a perceived balance, possibly accurate or due to timing discrepancies.

CP75 — Audit Documentation Request

This request is for verification related to a credit or deduction. It’s often straightforward, without cause for panic.

Letter 5071C — Identity Verification

This notice is an identity check and isn’t about errors in tax returns.

Notice of Intent to Levy (LT11/CP504)

This is more serious and requires immediate action. Professionals, however, can resolve these matters routinely.

Regardless of the code, context is essential, and that’s where professional guidance is invaluable.

Common Mistakes to Avoid When You Receive an IRS Notice

A composed, correct response typically results in resolution. However, these frequent missteps can exacerbate issues:

Ignoring the notice. Adherence to deadlines is crucial.
Contacting the IRS without consulting a professional. Risk agreeing to unjust terms.
Paying indiscriminately. Amounts might be incorrect by significant margins.
Submitting documents without context. The IRS might misinterpret intentions without clarity.
Assuming notice equals audit. Most are unrelated to audits.

The Typical Resolution Process

Here’s how resolution usually unfolds:

Engagement with your financial professional to share the notice.
Thorough review of your return and IRS data to identify triggers.
Assessment of IRS findings’ accuracy.
Preparation of the correct response—or advice not to respond.
Verification of amounts owed, if any, aligning them to the right tax year.
If disagreements arise, they provide precise explanations with supporting documents.

Often a single letter resolves concerns. At times, more steps are needed, but most situations are manageable.

The Benefits of Professional Assistance

IRS notices can intimidate, yet professionals encounter them daily. They possess expertise in:

Decoding notice codes
Aligning notices with returns
Spotting IRS errors
Correcting payment misapplications
Communicating effectively with the IRS
Knowing when escalation is necessary
Deciding when non-response is appropriate

Most importantly, they maintain your calm and ensure protection through the entire process.

Don't Face an IRS Notice Alone

The critical step is to act promptly. If you’ve received an IRS notice—whether it’s perplexing, worrisome, or unexpected—reach out to our firm. We’ll review it together, clarify its implications, and collaboratively determine the best path to resolution.

There’s no need for panic.
No guesswork.
Just clear guidance, unwavering support, and a straightforward resolution path forward.

Schedule a Free Consultation

Let's set you up for success.

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