Understanding IRS Notices: What They Mean and How to Respond

For many taxpayers, seeing an envelope from the IRS in the mail can be intimidating. The seal alone can raise anxiety: Did I make a mistake? Am I in trouble? In reality, IRS notices are quite common, and most can be resolved quickly once you understand why they were sent and what steps to take.

This article provides an overview of the most common types of IRS notices, outlines the possible reasons for receiving one, and offers guidance on how to respond appropriately.

Why the IRS Sends Notices

The IRS communicates almost exclusively by mail, not by phone, text, or email. In the mail, you might receive an IRS notice for several reasons, including:

• Clarifying information reported on your tax return

• Notifying you of a balance due

• Confirming changes made to your return

• Requesting additional documentation

• Alerting you to a possible error

Each notice includes a code in the upper right corner (for example, CP2000 or CP12). That code identifies the purpose of the letter and guides your next steps. If you’re unsure how to proceed, it’s best to contact your tax professional, or VAAS Tax Advisor.

Five Common IRS Notices and What They Mean

1. CP2000 — Proposed Changes to Your Tax Return

This notice means the IRS found discrepancies between your return and information from third parties, such as employers or banks. For example, if your W-2 reports more income than you listed, the IRS may suggest corrections.

How to Respond:

Carefully review the notice. If you agree, sign and return the response form with payment for any additional tax owed. If you disagree, provide documentation supporting your position.

2. CP12 — Refund Adjustment

You may receive this notice if the IRS corrected a math error or other discrepancy on your return. The change could increase or decrease your refund, so review this notice carefully and save for your records.

How to Respond:

If you agree with the adjustment, no action is required. If not, contact the IRS within 60 days from the date of the notice to request a reversal.

3. CP14 — Balance Due

This is the most common IRS notice. It means you owe additional tax and outlines the total amount due, including any penalties and interest.

How to Respond:

Do not ignore it. You can pay the amount in full, request a payment plan, or contact the IRS if you believe the balance is incorrect.

4. Letter 4883C — Identity Verification

When the IRS suspects possible identity theft, they may send this letter to verify your identity before handling your tax return.

How to Respond:

Follow the instructions immediately — typically by calling the IRS or verifying online. Delays could hold up your refund.

5. CP49 — Refund Applied to a Debt

You’ll receive this notice when your refund has been used to pay a past-due federal tax or another debt (such as child support or student loans).

How to Respond:

Review the notice to see where the refund was applied. If you disagree, contact the agency that received the payment rather than the IRS.

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What to Do When You Receive a Notice

In addition to the steps above, keep these best practices in mind:

1. Don’t panic. Most notices are routine and easily resolved.

2. Read thoroughly. The notice explains the issue, your options, and any deadlines.

3. Check the notice number. This helps you identify details online or discuss the issue with your tax advisor.

4. Verify the information. Compare the notice with your tax return and records.

5. Respond promptly. Many notices have strict timelines for replying or disputing.

6. Be alert for scams. The IRS never initiates contact by email, text, or phone to demand payment. Legitimate communications always arrive by mail.

How We Can Help

IRS correspondence can be confusing especially when it involves complex calculations or disputed items. We can:

• Review your notice for accuracy

• Explain what it means in plain language

• Communicate directly with the IRS on your behalf

• Assist with documentation, corrections, or appeals

• Help you establish a payment plan if needed

With professional guidance, most IRS matters can be handled efficiently and with minimal stress. Receive a letter in the mail from the IRS? Contact your VAAS Tax Advisor to discuss further.