IRS Notices Explained: Common Reasons & How to Resolve Them

It might be unsettling to get a notification from the IRS, especially if you're unsure of what it means or what to do about it. But not all of the IRS's correspondence indicates a serious issue. Many are simply automated alerts that notify you of small discrepancies or things you need to do. The most common IRS notices, their possible causes, and helpful strategies for handling any problems will all be covered in this blog.

Why You Might Receive an IRS Notice

The IRS sends out millions of letters each year. Some common reasons include:

• Income Mismatches: The income you listed on your tax return differs from the information provided by banks or employers.
• Unpaid Taxes: The IRS is awaiting payment of an unpaid debt.
• Return Adjustments: A mistake or inconsistency on your Form 1040 has been fixed by the IRS.
• Identity Verification: Your return has been flagged for potential identity theft.
• Installment Agreement Defaults: You’ve missed a scheduled payment.

Common IRS Notices and What They Mean

CP2000 – Underreported Income

When the IRS records and what you filed don't match, this notification is delivered. Unreported income from a W-2, 1099, or other sources is usually the cause of this. How to respond: Review your return and the notification. If you agree, sign the agreement and return it with your money. If you disagree, provide evidence to support your claim.

CP523 – Installment Agreement Default

You missed a payment on your IRS installment plan, according to this message. Solution: Contact the IRS to renegotiate your agreement or pay the amount owed right away.

CP75 – EITC or Child Tax Credit Audit

The IRS is looking into your eligibility for certain tax credits. What to do: Provide the required documentation, such as the medical or educational records of your dependents, to prove your eligibility.

Letter 4883C – Identity Verification

When the IRS believes your return was filed falsely, it sends you this letter. How to fix it: Verify your identity by calling the number on the letter and presenting the necessary paperwork.

CP14 – Balance Due Notice

You owe federal taxes, according to this message. Options include contacting the IRS for help, requesting a payment plan, or paying the entire amount online.

How to Respond to an IRS Notification

• 1. Carefully read the notice: Recognize what the IRS is requesting. A deadline, typically 30 days, is included in most notices.
• 2. Compare With Your Tax Return: See if the notice’s claims match your records.
• 3. Respond Appropriately:
  • Agree with the notice? Pay the amount owed.
  • Disagree? Send a written explanation with supporting documents.
  • Partially agree? File an amended return (Form 1040-X) with the notice attached.
• 4. Use Certified Mail: Always send your response using tracking to ensure proof of delivery.
• 5. Watch Out for Scams: The IRS will never contact you by phone or email to demand payment right away.
• 6. Don't ignore it: Postponements may result in fines, interest, or harsher consequences.
• 7. Consult a Professional: Expert assistance may be necessary for complex notices.

How to Avoid IRS Notices in the Future

• Verify that all the information is accurate before filing.
• Keep detailed records of your income, expenses, and deductions.
• Use certified tax software or hire a certified tax specialist.
• File your return on time and pay any taxes payable before the deadline.

When to Speak with a Tax Expert

You should seek professional help if:

• If you're dealing with an audit or identification verification, you should get professional assistance.
• The notice involves a large amount of money.
• You’ve missed a response deadline.
• You need to negotiate a payment plan.