A notice or letter (“Notice”) from the IRS can sound intimidating, but there can be many reasons for receiving one. Not every notice is negative or even needs the same amount of attention. That is a common misconception: one that makes the act of receiving a letter more worrisome than it needs to be.
IRS notices or letters are sent to alert you that there has been an action, update or change to your IRS account. That change can cover everything from an informational update, to an extra identification request, to a delay in your return/refund due to additional processing or further IRS reviews/audits.
In most cases there is little reason to panic or get overly stressed if you receive a formal IRS notice or letter. Instead, learn some of the reasons for why you may be receiving a notice and what you should do next. You can also find a lot more details on the official IRS website.
Reason 1: Money
Money is the first thing associated with an IRS notice. Everyone’s first question is: “Do I owe money?” or “Has my refund been reduced?” The IRS does send out notices regarding a balance being due. However, it can also be notifying you of your refund or any adjustments made.
Typically, a taxpayer is alerted via a formal notice or letter when they have received an IRS payment, had an adjustment to their refund or are need to provide additional supporting evidence for credits or deductions they have claimed.
You can often see these IRS actions on your (free) tax transcript with different tax transaction codes (e.g 570 – Refund freeze) and the associated IRS notice notification code 971. The actual letter or notice for the specific IRS action will be mailed to your address on file with the IRS.
Unfortunately if you see a message saying that your tax return needs further review by the IRS, you can expect your refund payment to delayed.
You would also likely receive a CP07 Notice (details in table below), which means the IRS has received your tax return and is holding your refund until it completes a more thorough review.
If the agency finds no issues or is satisfied with your response to resolve outstanding items, your refund could arrive within six to 12 weeks.
If the IRS does find issues with your return, it’ll send you further letters and noticed with instructions on what to do within that same period. That means you’ll get your refund months later than you anticipated.
Reason 2: Information or Identity Verification
The second most common reason for an IRS notice to come in the mail is to get more information from the tax filer (e.g. a CP05 notice) around your tax filing, including earning ands deductions claimed. They may have a question regarding your return. Other times they need more information on a specific item.
There are also times when they need to confirm your identity, due to your return being flagged either by their systems or you have reported prior cases of fraud. If this happens the IRS will hold your refund until your identity is verified. You will likely receive a 5071C letter that provides instructions for proving your identity.
If your tax return is legitimate, don’t panic — an IRS letter doesn’t mean there is proof of identity theft, merely a suspicion.
Due to the many cases of identity theft, the IRS will often send a special pin number to file your taxes. This identifier will let them know that it is actually you.
Reason 3: Updates
The third reason is due to updates or delays in processing your return. This is simply notifying you that the IRS has received your taxes, but they are running behind. It’s nothing to be concerned over and is a regular occurrence: seen especially during the pandemic.
In 2022, this is issue seems to be a bigger concern and many are seeing this as “refund processing beyond normal times” warning messages in WMR/IRS2Go. The IRS will send an associated notice if the refund delays are due to additional (manual) reviews of your return that require them to make an adjustment or get more information from you.
What To Do About About Your IRS Notice
Now that you have read the letter, what do you do about it? The good thing about the IRS notice is that it will inform you on what the IRS is requesting, has already updated and what your options are.
The letters will generally provide instructions on what your next course of action is: be it sending documents, agreeing to IRS changes or sending a payment if you end up having a balance owed with the IRS.
A majority of the letters sent by the IRS do not need any course of action. They are simple informational notices (e.g. like letters for adv CTC and stimulus check payments). However, if there are any additional steps there will not only be instructions included in the letter, but a time frame the tax filer has to respond by as well.
The IRS has specific guidelines on how long it takes them to send certain notices, how long you have to respond and when follow-up responses/resolutions can be expected.
The most common worry tax filers have is sending in the documents on time. If there is a delay for any reason, call the number of the IRS located at the top of the letter and let them know.
All agents at the IRS understand the complex and tense nature of taxes: as such, they are more than willing to assist with any questions you may have. No question is a wrong or a dumb question (unless you are trying to intentionally hide something)!
After Following the instructions
After you have followed the instructions outlined in the letter, be it to send payment or send further information, make sure to keep the original letter. This way, you can verify that you received it and that you followed every step noted. It is also an important note, that when sending documents to the IRS they should always be copies
Never send back original documents or ones you only have a single version of. A clear copy will be sufficient. Place the letter and an extra copy of the documents sent to them in a file. This file will be for your records in case you should need to track back in a follow-up.
I suggest you also keep an electronic copy of all documentation and correspondence you have with the IRS.
How To Tell if My IRS Notice is Real
A common worry that often comes with the IRS is fraud, especially over the last few years. Fraudulent letters will often creep up throughout the tax season and target tax payers desperate for their delayed refund payment.
However, the IRS is aware of the increase in fraud and related issues. As such, they have added numerous safeguards to counteract it. Even so, make sure that when you receive a notice or letter you keep the following in mind:
- It has your correct and exact details on the top right hand section of the notice
- Check the IRS number against the IRS website (search for it).
- It is NOT asking for payment to be sent directly to the IRS. They will never have you send payment or documents to a third party.
- There will be a copy of the same notice on your account at IRS.gov
- The IRS will never contact you via social media or text message.
If you are still uncertain, feel free to call the IRS from the number at the top of the notice. If you have received a fraudulent letter, the IRS may wish to have more information on it so that they can take further action.
Yes for certain notices. You will first need to setup/validate and log into your (free) IRS online account to do this. You can view the following tax related items in your online account
- Data from your most recently filed tax return, including your adjusted gross income, and access transcripts
- View information about recent IRS payments like the Economic Impact (Stimulus checks) and advance Child Tax Credits
- Certain IRS notices.
- View 5 years of payment history, including your estimated tax payments
- View any pending or scheduled payments
You can also adjust your IRS communication preferences to go paperless for certain notices and get email notifications for new notices (which I recommend)
How to Dispute or Appeal an IRS Notice
Due to the many reasons for receiving an IRS notice, you can dispute almost anything that does not seem accurate. If you feel that the amount owed is incorrect or that the information is incorrect, you can mail the IRS directly.
When mailing, there should be a contact section included on the top of the notice that allows the recipient to mail letters and documents that pertain to the dispute.
Again, keep the original documents in case there are any delays or questions. Disputing a claim will take time but it should be noted that you have done so prior to the given due date.
Many filers will not dispute the IRS adjustment or notice due to the concern that they will be penalized. Again, if you have a question, contact the IRS directly. This is the simplest method, and you can note when you called to question the instructions.
Common IRS Letters and Notices
Here are some common IRS notices or letters tax filers may see during the year:
|Code number and name||Description and Purpose|
|CP07||Tax Filers receive a CP07 Notice, after the IRS has received their tax return and is holding it and any refund payments until they completes a more thorough review This includes an examination of benefits or itemized deductions claimed.|
|CP12||Mistakes are corrected and the overpayment has been identified. The solution is to update your return in your records and contact the IRS within 60 days.|
|CP14||You will get this letter when the IRS finds you have an overdue balance with them. In other words, you have a tax debt to settle with the IRS due to unpaid taxes. This does not mean you made a mistake or reason to panic, it is just a settling of accounts.|
|CP49||Taxpayers whose refunds are used by the IRS to cover existing payment obligations should receive a CP49 notice in the mail.|
|CP501||Your balance is due. To solve, make the payment, call the IRS if you would like to argue the payment, or revise the payment agreement.|
|CP502||This is the second time you are being reminded to make a payment. To fix, pay as much as you can so that you avoid any additional penalties or interest accrued.|
|CP2000||Your income or payment information on file is not in accordance with the return. To resolve, complete the response form and follow the indicated instructions.|
|CP71C||Your passport was rejected, this is also a reminder that you will incur a tax penalty and that you owe interest. To solve, pay the amount or speak to a tax debt professional.|
|CP523||Pay attention: This is a notice to end the installment agreement and the IRS will seize any assets due to failed payment. To resolve this code, make a payment before the termination date and find a tax debt professional to resolve the case.|
|LTR3172||This is a notice that the IRS has filed a federal tax lien. In order to solve this, you will need to complete form 4089 and return with payment.|
|LTR3219b||The IRS will assess a tax deficiency that has been accrued by you. And will require payment in the mail and the completion of the form 4089|
|Letter 6419||The IRS sent letter 6419, Advance Child Tax Credit Reconciliation from late December 2021 through January 2022 which included the total amount of 2021 advance Child Tax Credit (CTC) payments, # of qualifying children and repayment protection details. These details are required for your 2021 return. Incorrectly claiming these amounts will delay refund payments.|
Remember, there is no reason to immediately panic when you get an IRS notice. Notices from the IRS are perfectly normal and offer a chance to see what change/updates the IRS is or has made.
Read the notice carefully and if you feel it was incorrectly made, you will either have a chance to provide additional documentation to validate or appeal IRS decisions.