Receiving a letter or notice from the IRS can be stressful, but an IRS notice does not automatically mean that you are being audited or that you have done something seriously wrong. In many cases, the IRS sends notices to request information, explain a change to a tax return, notify you about a balance due, or correct an issue in its records.
Understanding what the notice says and responding correctly can prevent a relatively simple issue from becoming a larger tax problem.
Why Does the IRS Send Notices?
The IRS may send a notice for many different reasons. Common examples include:
- A tax return contains information that does not match IRS records.
- The IRS believes additional tax is owed.
- A refund amount has changed.
- The IRS needs additional documentation.
- A payment was not received or was applied differently than expected.
- The taxpayer is missing a required tax form.
- The IRS has made a correction to a tax return.
- The taxpayer is being selected for an examination or audit.
An IRS notice normally explains why it was sent and what action, if any, is required.
Read the Entire IRS Notice
Do not focus only on the amount shown on the first page. Read the entire notice carefully.
Look for:
- The notice number
- Tax year involved
- Date of the notice
- Amount of tax, penalty, or interest
- Explanation of the issue
- Deadline for responding
- Required documentation
- Instructions for payment or disagreement
- Contact information or response address
The tax year is especially important. An IRS notice may concern an older tax return rather than your most recently filed return.
Do Not Ignore an IRS Notice
Ignoring an IRS letter generally does not make the issue disappear. If the notice concerns an unpaid tax balance, additional interest and penalties may continue to accumulate.
Some notices also contain specific deadlines for disputing an IRS adjustment. Missing a deadline can make it more difficult to challenge the proposed change.
If you believe the IRS is wrong, you should still respond according to the instructions rather than simply ignoring the notice.
When the IRS Changes Your Tax Return
Sometimes the IRS changes information reported on a tax return because information received from an employer, financial institution, or another source does not match the return.
For example, the IRS may receive a Form W-2 or Form 1099 showing income that was not included on the tax return.
The IRS may then send a notice proposing an adjustment.
If the information is correct, the taxpayer may need to pay the additional tax. If the information is incorrect, the taxpayer can generally provide documentation explaining the discrepancy.
What Documents Should You Keep?
If you need to respond to an IRS notice, supporting documentation may be extremely important.
Depending on the issue, useful records may include:
- W-2 forms
- 1099 forms
- Bank statements
- Receipts
- Invoices
- Mileage records
- Mortgage interest statements
- Charitable contribution records
- Medical expense records
- Business expense documentation
- Previous tax returns
- Proof of tax payments
- Documents supporting tax credits or deductions
Keep copies of everything you send to the IRS.
What If You Cannot Pay the IRS?
An IRS notice stating that you owe money does not necessarily mean you must immediately pay the entire balance if doing so would create financial hardship.
Depending on your circumstances and eligibility, payment arrangements or other IRS collection options may be available.
Do not assume that you automatically qualify for a particular program. Review the current IRS requirements before applying.
What If You Disagree With the IRS?
If you believe an IRS notice is incorrect, carefully compare the notice with your tax return and supporting records.
The notice should explain how to disagree with the proposed adjustment or provide additional information. Follow those instructions precisely.
Send copies rather than original documents unless the IRS specifically requests originals.
It is also wise to keep proof that your response was sent, including tracking information when appropriate.
Be Careful About IRS Scams
Taxpayers should also be cautious about fraudulent IRS communications.
Scammers may impersonate IRS employees and demand immediate payment through unusual methods. They may also use threats or pressure to make the taxpayer act quickly.
If you receive a suspicious message, do not provide financial information simply because someone claims to represent the IRS. Verify the situation independently using official IRS contact information.
Final Thoughts
An IRS notice should be taken seriously, but it should not automatically cause panic. The most important steps are to read the notice carefully, identify the tax year and issue involved, check your records, and respond by the stated deadline when a response is required.
Keeping organized tax records throughout the year makes responding to IRS questions much easier.
Disclaimer: This article is provided for general informational purposes only and does not constitute tax, legal, or financial advice. IRS procedures, tax laws, deadlines, and eligibility requirements can change. For advice regarding a specific tax situation, consult a qualified tax professional or verify the current information directly with the IRS.