Received a notice from the IRS? We know it’s alarming, but it’s important to remember that not all IRS communications indicate a serious problem. In many cases, these notices are simply a way for the IRS to request information or alert you to a specific issue. Knowing the most common types of IRS notices and what options you have available can help in managing your tax affairs more effectively. Here’s a guide to some of the most common IRS tax notices and what they mean.
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1. CP2000 Notice: Underreported Income.
Essentially, a CP200 notice is issued when information on your tax return does not match what the IRS has on file, such as when the income reported does not correspond with what was reported by third parties (i.e. employers or financial institutions). There are many reasons for why this could happen; one common cause of this is when taxpayers forget to include a side job/business income or improperly report investment income.
What you can do:
Review the notice carefully to understand what discrepancies have been found and what changes are being proposed for the respective tax year
Gather all your financial records and tax return for the related tax year and compare them to the information provided in the notice.
If after carefully evaluating your financials, you agree with the information in the notice -- follow the instructions to pay any additional tax owed (if applicable).
If you disagree, you can provide documentation to support your position and explain the discrepancy.
It is advisable that you speak to a qualified tax professional who can advise and facilitate these processes.
2. CP14 Notice: Balance Due
A CP14 notice informs you that you owe taxes to the IRS. This notice is usually sent after the IRS has processed your tax return and determined that you owe additional taxes, penalties, and/or interest.
What you can do:
Verify the amount owed by reviewing your tax return and comparing it with the notice.
If the notice is correct, pay the amount owed by the due date to avoid additional interest and penalties. There is always the possibility of a computational error, so it is advisable to thoroughly evaluate your financial records and if possible, seek the help of a tax professional who can represent you.
If you cannot pay the full amount, consider setting up a payment plan with the IRS.
If you believe there is an error, contact the IRS to discuss the issue or request the services of a tax resolution specialist who can investigate the matter on your behalf.
3. CP501 and CP503 Notices: Reminder of Balance Due
These notices are reminders that you have an outstanding balance with the IRS. CP501 is the first reminder, and CP503 is a follow-up if you haven’t responded to the CP501 notice.
What you can do:
Ensure you have received and reviewed your initial balance due notice (CP14).
Pay the balance or contact the IRS to arrange a payment plan. A tax relief professional can also assist you in reviewing payment plans available with the IRS.
Ignoring these notices can lead to further collection actions, so it’s important to respond promptly. It is important to review and determine if any taxes/penalties can be disputed.
4. CP90/CP297 Notice: Final Notice of Intent to Levy and Notice of Your Right to a Hearing
These notices are very serious. The IRS is informing you, in writing, that they intend to seize your assets to satisfy your tax debt. This could include levying your bank accounts, wages, or other property.
What you can do:
Reach out to the IRS immediately to address the issue and avoid the levy.
Request a Collection Due Process (CDP)
Consider seeking professional tax assistance to navigate this situation.
5. CP88 Notice: Delinquent Return Refund Hold
A CP88 notice is sent to inform you that the IRS is holding your tax refund due to unfiled tax returns (one or more).
What you can do:
Gather all pertinent, supporting financials and file the missing returns as soon as possible. Finding previous financials documents, such as W2s, can be challenging – especially if they are from some time ago. A professional tax relief service can assist you with pulling wage and income transcripts and submitting the unfiled returns.
You may need to send copies of the filed tax returns to the address listed on the notice, if you already filed the return which the IRS says is missing.
Once the IRS processes the missing returns, your refund should be released.
6. LT11 Notice: Final Notice of Intent to Levy and Notice of Your Right to a Hearing
Like the CP90/CP297 notices, the LT11 notice is a final warning before the IRS takes action to levy your assets. It also communicates information on your right to request a hearing.
What you can do:
Respond immediately to avoid enforced collection actions.
Request a Collection Due Process (CDP) hearing.
Consider consulting a tax professional to explore your options and develop a plan to address the tax debt.
Conclusion
Receiving an IRS notice can be stressful; however, taking the time to understand the meaning of the notice and how to respond can help to resolve the matter before it turns into a bigger issue. As such, it’s very important to read the notice carefully, thoroughly verify the information, and take appropriate action immediately. If you’re unsure how to proceed or need help, consider reaching out to a qualified tax professional who can review your situation and discuss options with you.
The information provided in this article is for educational purposes only and does not constitute tax nor legal advice. For more information, speak to a qualified financial professional.
Aventa Tax LLC provides tax relief services in Maryland. We are happy to review your specific situation and see how we can be of service - schedule a free consultation today.
Aventa Tax LLC is based out of Germantown, Maryland. We offer tax resolution services for small businesses and individuals in Montgomery County, MD and other surrounding locations, such as Prince George’s County and Frederick County. Our Enrolled Agent can also provide tax representation services nationwide.
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