What to Do When You Receive an IRS Notice: A Step-by-Step Guide
Don't panic, IRS notices are common and vary in seriousness, so first read the notice number to identify the issue (e.g., CP2000 for underreported income, CP504 for a levy) and compare the IRS's claim with your records. Check and meet the deadline to preserve your rights, respond in writing with documentation if the notice is wrong, or pursue payment options like installment agreements or offers in compromise if you owe money. Never ignore the letter.
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3/10/20262 min read
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You check your mailbox and there it is, a letter from the Internal Revenue Service. Your heart rate spikes. Before you panic, take a breath. Not every IRS notice means you're being audited, and most of them are far less scary than they seem at first glance.
The IRS sends millions of notices every year for all sorts of reasons. Some are simple, maybe there's a math error on your return, or they need to verify your identity before processing a refund. Others are more serious, like a proposed change to your reported income based on a W-2 or 1099 that doesn't match what you filed. The key is understanding exactly what the notice says before you do anything.
Every IRS notice has a number in the upper right corner, things like CP2000, CP504, or LTR 3219. That number tells you what the notice is about. A CP2000, for example, means the IRS thinks you underreported income. A CP504 is a warning that they intend to levy your assets. These are very different situations requiring very different responses, so identifying the notice type is your first step.
Once you know what you're dealing with, check the deadlines. This is critical. Most IRS notices give you a specific window to respond, typically 30 or 60 days. Miss that window and you lose important rights. For example, if you receive a Notice of Deficiency (sometimes called a 90-day letter), you have exactly 90 days to file a petition with the Tax Court under IRC Section 6213. Let that deadline pass and the IRS can assess the tax without you ever getting your day in court.
Next, pull your records. Compare what the IRS says against your actual return and supporting documentation. You'd be surprised how often the IRS is simply wrong, they may have matched income to you that belongs to someone else, or failed to account for deductions and credits you legitimately claimed.
If the notice is correct and you owe money, you have options beyond just writing a check. The IRS offers installment agreements under Section 6159, and in some cases you may qualify for an offer in compromise or currently not collectible status. If the notice is wrong, respond in writing with documentation before the deadline.
The biggest mistake people make is ignoring the letter. An IRS notice doesn't go away on its own. If anything, silence makes it worse, the IRS assumes you agree, assesses the additional tax, and starts collection. Open the envelope, read the notice number, check your deadline, and respond.