Got an IRS letter? What a former IRS insider would do first

Eric Newman, CPA2 min read

First, don’t panic. IRS sends letters out all the time for various reasons. But also, do not waste time responding to it. The sooner you address it the better. Look for a response date and make sure you respond by that date. The letter should have a number on it in the top right corner such as CP2000 or CP501. Read carefully what question IRS asks or what issue they are raising. Review your records carefully to make sure you understand what they are saying and determine if it is correct. It may be a math adjustment. If some information is missing, then you should supply the info if you have it.

CP2000 Notice

For a CP2000 Notice, the income or payment information IRS received from third parties, such as employers or financial institutions, doesn't match what you reported on your tax return. This difference may increase or decrease your tax or may not change it at all. The notice explains proposed changes to your tax return and information IRS used to determine them. This notice isn’t a bill and your response may be required.

What you need to do: Review the entire notice and follow the instructions to resolve this issue. Reply to the notice by the date listed.

• If a response form is included in your notice, complete and sign it. State whether you agree or disagree with the notice and include any supporting documentation.
• If your notice doesn’t have a response form, follow the notice’s instructions.
• If you agree with the notice and don’t have other income, credits, or expenses to report, follow the notice’s instructions. You don’t need to amend your return.
• If you don’t reply or IRS can’t resolve the discrepancy, the IRS may send another notice and a bill later.

CP501 Notice

For a CP501 Notice, the notice is a reminder that you owe a balance on one of your tax accounts. You received this notice because IRS has not received your payment or a response to the previous notice requesting you pay this balance.

What you need to do:

• Read your notice carefully. It explains how much you owe, when your payment is due, and your payment options.
• Pay the amount you owe by the due date shown on the notice.
• Make a payment plan if you can't pay the full amount you owe.
• Contact IRS if you disagree by calling the toll-free number shown on your notice.

Note that if you suspect a fraudulent letter or call from the IRS, you should call: 1-800-829-1040.