The Internal Revenue Service (IRS) sends notices or letters to taxpayers for various reasons. If you happen to receive one, there is no need to panic. Many of the issues in the letter can be resolved by working with a tax expert.
In this article, we will discuss common reasons the IRS sends notices to American taxpayers.
What is an IRS Notice?
An IRS notice is a letter sent to a taxpayer who has issues with their taxes and tax returns. Often, the notification involves the taxpayer’s balance dues, refunds, payment delays, or other tax return concerns.
6 Possible Reasons You Received an IRS Notice
It’s normal to be worried when you receive an IRS notice. But, getting a letter from the IRS doesn’t necessarily mean you did something wrong.
Here are possible reasons for the issuance of IRS notices:
1. The IRS needs supporting documents from you
One reason you may receive a notice is the IRS needs supporting documents from you. The agency may need to verify some credits you claimed on your tax return. These credits may be earned income credit, additional child tax credit, or recovery rebate credit.
The notice should identify the information the IRS needs from you so you can provide copies for review. Along with the supporting documents, you also need to send the IRS a response form listing the specific supporting documents you are submitting.
If you are unsure how to proceed with the notice, you can consult a tax expert to promptly resolve the matter.
2. The IRS made changes to your tax return
When processing your tax return, the IRS sometimes makes changes to your original tax return. In some instances, you incur additional taxes as a result. As such, you must thoroughly read the notice because it explains the changes the IRS made and why you owe more taxes than what you claimed on your original tax return.
If you agree with the information in the letter, you need to pay the amount on the date specified in the notice. If you can’t pay the full amount, you can make arrangements using the Online Payment Agreement tool.
Should you disagree with the changes, you should contact the IRS at the telephone number indicated on your notice. You’ll also need to prepare supporting documents to back up your claim.
If you decide to mail the IRS, be sure to include a copy of the notice with your supporting documents. Expect the issue to be resolved within 30 to 60 days.
3. You have a balance due
All these letters will require you to pay the balance due indicated in the notice. For instance, CP14 is sent if you have unpaid taxes. Meanwhile, CP22E concerns recent audits on your tax return in which changes have been made. The notice contains the changes from the audit, including the pending balance you need to settle.
4. Tax penalties have been assessed against you
IRS notices are also sent because penalties have been assessed against the recipients. If you received one, the IRS may have charged penalties against you due to your failure to file your tax return electronically as required.
If you disagree with the penalties indicated in the notice, you should contact the IRS at 800-829-0922 to discuss your account. Otherwise, you will need to mail your full payment within the date indicated in the letter to avoid additional interest charges.
5. You have defaulted on your existing installment agreement
The CP523 notice is sent to inform the recipient of the IRS’ intent to terminate the installment agreement and seize their assets. If you received this notice, your first option is to pay the amount due before the termination date.
Alternatively, you can request the IRS to reinstate your agreement. However, you may have to pay a reinstatement fee or settle your new tax liability in full.
Failing to respond to the notice can be a ground for the IRS to terminate your installment agreement and start the collection process. At this point, they can file a federal tax lien or seize your wages and bank accounts.
6. The IRS intends to levy or seize some of your assets or social security benefits
An IRS notice about a potential levy of assets or social security benefits is usually sent after earlier notices were issued but remain unanswered.
The first notice is the CP90, which is a notification of the IRS’ intent to levy certain assets for unpaid taxes. The second and third notices are the CP91 and CP298, which serve as a warning that the IRS is levying up to 15% of your social security benefits for unpaid taxes.
The fourth and final notice is either the CP504 or LT11. The CP504 is sent because you have not paid your full balance. Failure to immediately pay the amount due will alert the IRS to levy your income and bank accounts and seize your property, including your state income tax refund.
Meanwhile, LT11 involves non-payment of your overdue taxes. If you fail to pay the amount you owe, the IRS will proceed to seize your property.
However, if you pay your balance in full, the IRS will stop charging interest and penalties against the unpaid amount. If you cannot pay off your account, you should contact the IRS through the telephone number provided in the letter.
Staying on Top of Your Taxes
You may find it stressful to handle IRS-related matters, but it doesn’t have to be. Before you start worrying about the IRS notice you received, check the details of the letter first. It might be a simple notification, but if it requires payments and other processes, don’t be afraid to consult with a tax expert.
If you are facing a tax problem and need an expert to help you, reach out to us at Peace of Mind Tax Help. Our team is composed of leading experts in mediation and tax negotiation services, and we can help you minimize your tax liability.
Contact us today so we can talk about the tax resolution process for your tax problem.