IRS and State Notices/Letters and Their Meanings

Receiving a letter from the IRS or the state can be intimidating, especially if you’re unsure what the notice is for or what to do next. Fortunately, many notices are nothing to worry about and are purely informative.

Below, we take a look at everything you need to do — and what not to do — after getting a notice from the IRS or the state, so you feel prepared and can confidently take the next steps. By exploring the meaning of different notices and working with an experienced tax attorney, you can navigate these letters with ease.

What Is an IRS Notice or Letter?

Each year, the IRS sends notices to Americans if there are any issues or updates with the taxes they file.

If the IRS sends you a notice, it typically means that they need to confirm the information you listed on your annual tax report, or you may owe taxes.

The primary reasons the IRS sends notices or letters in the mail include:

• There’s a balance due on your taxes.
• You’re owed a larger or smaller refund.
• There’s a question about your tax return.
• They need to verify your identity.
• Additional information is needed.
• Your return was changed in some way.
• Notifying you of delays in processing your return.

What Should You Do When You Receive an IRS Notice?

Here are some of the do’s and don’ts of getting IRS letters in the mail:

Don’t Panic

Above all else, do not panic when you receive a letter from the IRS. Often, these notices are nothing to worry about, and the agency is simply sharing an update about your tax account or refund. That said, you should still understand what the notice is about and what you’ll need to do to avoid small issues becoming bigger.

The good news is that the IRS would never send you a notice telling you that they will seize your assets or garnish your wages without several notices being sent out before. As long as you monitor every IRS payment letter you get and stay abreast of what’s going on with your taxes, there’s no need to panic.

If you aren’t sure what the letter you received means or how it applies to you, considering reaching out to a reputable tax professional for more information could reduce your confusion and stress significantly.

Do Review the Notice and Take Action Promptly

If you receive a letter from the IRS or the state, read and review it in its entirety. Most times, the notice will clearly outline its purpose and what you need to do next.

For example, if you’ve received a notice CP14 First Notice of Balance Due, this means that there is a balance on your unpaid taxes that you owe. If you agree to the amount of the CP14, you can arrange to make a one-time payment online or set up a payment plan.

It is imperative that you take action after reviewing what the notice is asking you for. If you owe taxes, send a payment or establish an online payment plan as soon as possible. Waiting too long to pay your tax balance could end up costing you penalty charges and additional interest.

Don’t Throw Away IRS Notices

Don’t throw a notice from the IRS or the state into the trash, even after you’ve taken the necessary actions. Instead, keep all these letters organized for your records, especially if the notice calls for you to adjust something on your taxes.

In some cases, you’ll need information on the notice for your tax return, so consider filing them somewhere secure for the future. It is a good practice to keep any notices or letters for at least three years before discarding them. In the event of an IRS audit, you want to make sure you have all applicable documentation.

Do Keep an Eye Out for Scams

Upon receiving a letter from the IRS, take a second to make sure it’s not a scam. Unfortunately, many criminals imitate the IRS and use their letterhead to scare people into giving them money.

Remember that the IRS primarily communicates through the mail. If you’re getting messages from the IRS via one of the following channels, it’s likely a scam:

• Social media platforms
• Text messages
• Email

Never share any financial or personal information unless you’re sure you’re communicating with the IRS.

If you receive a notice saying you need to make a payment, but you are sure that you don’t owe the government money, reach out to a tax professional such as a tax attorney. They can look over the letter and let you know if it is legitimate or not.

Don’t Reply Unless Notified

There is usually no reason for you to reply to a notice unless you receive specific instructions to do so. This is when you should start thinking about getting the help of a tax professional to respond for you.

If you owe a payment, you should reply with a payment. If you cannot make a payment, you should speak to a tax attorney about negotiating a payment plan on your behalf with the IRS.

Do Respond to a Disputed Notice

Anytime you disagree with the information on a notice from the IRS, you should respond with a letter explaining why you’re disputing it. You can typically send your dispute with all the necessary documentation to the address on the IRS notice. Including information and evidence that supports your case in your reply is key to getting the outcome you want and resolving the issue.

If you don’t send in any supporting documentation, the IRS won’t be able to thoroughly consider your dispute. Having the help of a tax professional would ensure that you have all of the documentation you can to support your case.

Different IRS Notices and Their Meanings

The IRS communicates with United States taxpayers using over 70 different letters and notices. Explore the meanings of a few of the most common types you may receive:

1. CP14: First Notice of Balance Due

Say you have filed your taxes with the IRS and maybe even sent a payment. If you still have a balance due, the IRS will use the CP14 letter to inform you of your unpaid taxes. It’s a first reminder or warning that money is owed.

If you’ve received a CP14 Notice that tells you about a tax payment you owe and you’ve set up an installment agreement plan, you’ve probably received a CP14IA. This notice is sent to you to remind you about the payment plans you’ve created and how much you owe for each installment.

2. CP88: Delinquent Return Refund Hold

A CP88 Notice indicates that the IRS is currently holding your refund because you owe taxes or haven’t filed at least one tax return. The agency will notify you right away if they’re keeping your expected return and if they’re applying it to the previous year’s balance.

3. CP75: Request for Supporting Documentation

If you’ve received this notice from the IRS, this means they need you to provide them with more information or documentation about the year’s return. When they send this notice, this means they’re looking for information related to one or more of the following:

• Premium Tax Credit (PTC)
• Earned Income Credit (EIC)
• Additional Child Tax Credit (ACTC)
• Recovery Rebate Credit (RRC)

Depending on your situation, the IRS will let you know what you need to send back to them. Make sure that you send them copies of the documents they request. If you send the originals and they get lost in the mail, you won’t be able to make another copy to send to them. This is another instance where having a tax attorney on your side is a huge asset to your case.

4. CP501: Reminder Notice

If you’ve received a reminder notice from the IRS, they’re just reminding you that you have a balance due that you haven’t paid. If you continue to ignore this notice, the IRS will send you CP503, which reminds you of the money you owe.

5. CP502: The Second Reminder Notice

Following the CP501 letter, you might receive another reminder CP502. It’s very similar in spirit to the reminder notice that is the CP501 letter. The language might be a bit firmer, but basically, it’s the IRS reminding you that you owe them money.

6. CP503: The Second Notice

Though it’s likely the third notice you’ve received, the CP503 letter acts as an official second request that there’s money owed on one of your tax accounts, and you need to take action.

7. CP504: Last Notice of Intent to Levy

While many of the notices and letters from the IRS are provided for information purposes and shouldn’t make you nervous, this one should. After sending you the CP501 and CP503 notices, the IRS will need to take action against you.

The CP504 is the final notice the IRS sends. If you don’t pay by the provided day, the IRS intends to look for assets it can levy toward your tax liability.

8. CP523: Installment Agreement Termination

If you set up an installment agreement with the IRS, but you don’t make good on your promise to pay, the IRS will send you this letter. When you receive a CP523, the IRS lets you know that they will terminate your installment payment plan if you don’t speak with them about resolving the taxes owed.

If you refuse to respond to this letter, the Internal Revenue Service will move forward and garnish your wages or seize your assets to recoup your taxes owed. It is imperative that you take this note seriously because the IRS will not send you another warning.

9. CP90: Intention to Seize Your Assets and Notice of Your Right to a Hearing

If you disregard previous requests to pay the taxes you owe, you’ll receive the CP90 Notice from the IRS that informs you they’ll levy your assets, such as:

• Automobiles
• Real estate
• Salaries
• Bank accounts
• Retirement benefits

If you’ve received this notice, it is crucial that you take action right away. Reach out to a reputable tax attorney for guidance if you need help with understanding the next steps after getting a CP90 Notice.

10. CP91: Intent to Seize Social Security Benefits

When the IRS sends a CP91 Notice, they’re letting you know that they intend to levy a maximum of 15% of your social security benefits to pay the taxes you owe.

11. CP297: Notice of Intent to Seize Assets

A CP297 Notice is really the IRS covering all their bases of communication. It is similar in intent to the CP90 letter. The difference is that it’s sent to your work and not your home. This intent to levy is another warning that if you continue not to take any action, they will move forward and seize assets.

12. LT11 Notice or Letter 1058: Intent to Seize Your Property or Rights to Property

If you don’t respond to the CP90 or the CP297, the IRS will send you their final notice to levy through an LT11 Notice or Letter 1058. These will indicate to you that the IRS intends to seize your property because of unpaid taxes.

Once you receive one of these notices, you should contact the IRS as soon as possible. A tax attorney is one of the most valuable assets you can have on your side in this situation.

13. LT16: Contact the IRS About Your Unpaid Taxes

This is a newly designed form from the IRS. It simply states that you have overdue taxes, and the IRS wants to collect your unpaid money. Ignoring an LT16 Notice may lead to enforcement action from the agency.

14. CP22A: Notice of Change(s) to Your Tax Return

This is a form you don’t want to get from the IRS. It informs you that a change was made by the IRS on your tax form, likely because of an error, and now you owe money to the IRS.

15. CP3219A and Form 5564: IRS Notice of Deficiency

The IRS Notice of Delinquency is a legal determination that you owe additional income taxes and often interest on that amount, plus additional penalties to the IRS. The IRS uses this form when they propose a change to a tax return because of an error where what you submitted doesn’t line up with what they have on file.

This notice is sometimes referred to as the 90-day letter since the IRS gives the taxpayer 90 days to dispute the change and the Notice of Delinquency.

Form 5564 shows the amounts due because of the changes. If you agree with the changes made by the IRS, you sign Form 5564, which was enclosed with the Notice of Delinquency and return it to the IRS.

If you don’t agree, you shouldn’t just ignore the form. You have the right to file a petition that you disagree with the Notice of Delinquency in the U.S. Tax Court.

16. CP508c: Revocation or Denial of Passport

The IRS will use this form if your tax bill is seriously delinquent. If you receive this notice, then you should know the IRS has communicated with the U.S. Department of State (DOS) about your delinquent taxes.

Typically, the DOS will not fulfill a passport application or renew a passport if they receive this notice from the IRS. The DOS can also opt to revoke or place limitations on your current passport because of this notice.

17. CP2000: Notice of Unreported Income

This form is used by the IRS when the income or payment on file fails to align with what you’ve recorded in your tax return. The IRS will propose changes to your tax form. This is not an audit letter. Instead, you can sign that you agree or sign that you disagree and then mail it to the agency.

It is important to note that this document is not an audit but merely a notice letting you know that the math was incorrect.

The IRS will also provide you with a document that explains the changes, and you have the opportunity to either dispute it or agree. If you agree with the changes, you can respond in writing and make your payment if needed.

Working with a tax attorney can help you take care of your CP2000 Notice with ease and accuracy.

18. IRS Letter 1153 and Form 2751: Proposed Assessment of the Trust Fund Recovery Penalty (TFRP)

The IRS typically sends Letter 1153 and Form 2751 to employers who fail to pay their federal withholding taxes outlined in the Federal Insurance Contributions Act. These letters are delivered together because Letter 1153 is a TFRP assessment, and Form 2751 is a document you must sign agreeing to pay the taxes owed before returning it to the IRS.

19. IRS Audit Letters

The thought of being audited by the IRS can be overwhelming and a little scary. Working with a tax attorney can make navigating the audit process simple, and they can help you file an appeal if that’s necessary.

The IRS has several forms they use related to audits. The letters vary depending on how the IRS plans to proceed with the audit.

20. Tax Code 280e

The cannabis industry has quickly become a lucrative billion-dollar industry. Unfortunately, for these businesses, the IRS still recognizes cannabis as a Schedule I controlled substance.

This means for those involved in building a cannabis business, none of the business-related expenses can get written off because of Tax Code 280e. This means that unlike other businesses getting tax breaks, the cannabis business is paying a tax rate about four times higher.

Working with a tax attorney that’s well-versed in cannabis law can help your business conquer federal taxes. You can also find cannabis tax planning and accounting services that help you maintain legal compliance and give you peace of mind.

Working With a Tax Attorney

A tax attorney can assist you if you have any issues with taxes or the IRS in general. These lawyers are well-versed in state, federal and local tax codes that you may or may not have abided by.

Not only do they help you when you’re in trouble with the IRS, but they can help you with vital tax advice. When you partner with an attorney before receiving a letter from the IRS, the lawyer can help you avoid getting to this point.

A tax attorney can help with the following:

Legal Research

Attorneys have the knowledge and the resources to conduct needed legal research. They must know about the up-to-date tax laws and policies that change often. The correct tax attorney will know where to find this updated information so they can apply it to your case.

Tax Disputes

Do you disagree with the letter sent to you by the IRS? Want to know more about what the Internal Revenue Service needs from you? If so, you can speak with a tax attorney to learn more about your legal options.

Instead of you fumbling on the internet trying to find an answer to what you’re going through, you can depend on a lawyer to help you make it make sense. The attorney will also speak with the IRS and negotiate on your behalf.

Tax Court Representation

If you’ve received a notice to appear in court for your tax situation, it is best to speak with an attorney. Unless you’ve had years of experience practicing law or have courtroom experience, you may want to leave this job to the professionals.

When you’re in a tax courtroom, you must understand the legal codes in your case and how to raise the proper defense. If the other attorney, who represents the IRS, knows that you are going up against them without help from a tax lawyer, they will see you as vulnerable.

Working with a tax lawyer who has courtroom experience is key to winning your case or having the case provide you with favorable terms. It helps to work with a local tax attorney because they are well aware of how those courtrooms work. They have experience dealing with other lawyers and are familiar with the judges and how they rule.

Legal Consulting

As an American citizen, you have rights, especially regarding taxes. Several laws can work in your favor or that your attorney can use to lessen your burden. Regardless of your situation and the type of help you need, the attorney can give you all your options.

IRS Garnishments and Tax Liens

There is nothing worse than finding out that the IRS will garnish your wages or they will place a lien on your property. Before you reach this point, the IRS typically sends you several notices. Because you failed to respond, the IRS will take action, and they will take your assets to pay down what you owe.

If you owe the government a large amount of money or are evading taxes, they can file criminal charges against you. If you find yourself in a situation like this, you need a tax attorney to assist you so they can reach out to the IRS and handle the entire case on your behalf.

IRS Audits

It can be stressful to receive a notice in the mail that the IRS is conducting an audit on your tax returns. The IRS typically tells you what they need, but it can be hard to gather all the appropriate documentation on your own if you aren’t sure what they’re looking for.

Even if you send the IRS what they need, they may send you additional communication or ask you more questions about what you sent. Your tax attorney can handle that on your behalf to avoid that tough conversation or needing to deal with the associated paperwork.

How to Find the Right Attorney

When you first search for an attorney near you, you may end up with an overwhelming amount of attorneys who pop up. Make sure you first double-check that you’re looking for a tax attorney. There are several different branches of law that an attorney can practice.

Once you find a few you like, please look at their reviews. You can use websites like Better Business Bureau or Google Reviews to see what other people have to say about their time with an attorney.

Pay particular attention to the reviews that talk about communication. You want to ensure that you work with an attorney who communicates with their clients and keeps them up to date on what is going on with their case.

Experience in Tax Law

Because you’re going up against a government agency, it is best to partner with an attorney with a background in tax law. This includes having experience negotiating with other tax attorneys and knowledge of the courtroom.

When you speak with your lawyer, ask them about their experience handling cases similar to yours and what strengths and weaknesses your case has. If an attorney does not answer your questions or is quick to make you sign a contract with them before they give you more advice, you may want to see counsel elsewhere.

Contact Polston Tax Resolution & Accounting for Help With IRS Notices

If you have questions about a notice from the IRS or the state, turn to Polston Tax Resolution & Accounting. We’re a law firm dedicated to dealing with taxation-related issues. Our skilled staff includes tax professionals such as IRS-enrolled agents and experienced attorneys who will help provide you with the help and assistance you need.

With our end-to-end tax resolution and accounting services, you can get your financial life on track and enjoy more peace of mind when it comes to your taxes. Interested in learning more? Contact Polston Tax to schedule a free consultation today.