IRS Notices

What to Do When You Receive an IRS Notice

By Tan Shu, CPA · Updated May 2026 · 10 min read

An IRS letter in the mail can be alarming — but not every notice means an audit, and not every notice means you owe money. Here's a step-by-step guide to understanding your notice, knowing your options, and deciding when to call a CPA.

Step 1: Don't Panic — Open It and Read It Carefully

The IRS sends millions of notices every year. Receiving one does not automatically mean you're being audited, that you owe back taxes, or that you're in trouble. Many notices are informational — confirming a change of address, acknowledging a payment, or asking for a simple clarification.

The first thing to do is open the envelope and read the notice in full. IRS notices typically state the reason for the notice at the top, followed by the specific issue (e.g., a discrepancy in reported income, a balance due, or a request for identity verification). Every notice includes a notice number (such as CP2000 or LT11) in the upper-right or upper-left corner — write this down. It tells you exactly what type of notice you've received.

Check the tax year and tax form referenced in the notice. Make sure it matches your records. Sometimes the IRS sends a notice for a year you've already resolved, or for a form you've already filed. Understanding which year and which form the notice refers to is critical before taking any next step.

Step 2: Identify the Notice Type and Check the Deadline

Every IRS notice has a response deadline printed on it — typically 30, 60, or 90 days from the date of the notice. This date is important. Missing it can escalate the situation, sometimes substantially. Here are the most common IRS notice types and what they mean:

CP2000
Income Mismatch (Underreporter Notice)
The IRS received income information (W-2, 1099, etc.) that doesn't match what you reported on your return. This is the most common notice — it proposes additional tax, but it is NOT a bill. You have the right to agree or disagree. Respond within 30 days.
Letter 12C
Missing Information Request
The IRS needs additional documentation to process your return — such as a missing W-2, Form 1099, or verification of a credit or deduction claimed. Respond with the requested documents.
5071C
Identity Verification
The IRS needs to verify your identity before processing your return. This is an anti-fraud measure. You can verify online through the IRS Identity Verification Service or by calling the number on the notice. Do not ignore this — your refund (if any) will be held until verified.
LT11 / Letter 1058
Intent to Levy / Final Notice of Intent to Levy
The IRS intends to seize your assets (bank accounts, wages, property) to satisfy an unpaid tax debt. This is serious and time-sensitive — you generally have 30 days to request a Collection Due Process (CDP) hearing. Contact a CPA or tax attorney immediately.
CP14 / CP501
Balance Due / Reminder Notice
You have an unpaid tax balance. CP14 is the first notice; CP501, CP503, and CP504 are escalating reminders. The earlier you address these, the more options you have — including installment agreements and offer in compromise eligibility.
Letter 566 / 2205
Audit Notice (Examination)
The IRS is examining your return — either by correspondence (mail audit) or in person (field audit). The letter specifies which items are being examined and what documents you need to provide. Most audits are correspondence audits focused on specific items, not full-blown investigations.
State Notice
State Department of Revenue Notice
Not from the IRS, but from your state tax authority. State notices have their own rules and deadlines, and state agencies are often more aggressive than the IRS on collections. Many state notices mirror federal issues — if you get both, address both separately.

Key Tip

Always check the date on the notice. The deadline is typically calculated from the notice date, not the date you received it. If the notice was delayed in the mail, you may have less time than you think. If you're near or past the deadline, call the IRS immediately or contact a CPA — do not assume it's too late to respond.

Step 3: Decide How to Respond

Once you understand what the notice asks for, your response generally falls into one of three categories:

  1. 1

    Agree and Pay or Provide Information

    If the IRS is correct — for example, you forgot to report a 1099 or missed a form — follow the instructions on the notice. For a CP2000, sign and return the response form agreeing to the changes and pay any amount due. If it's a 12C letter, mail the requested documents. Keep copies of everything you send.

  2. 2

    Disagree and Dispute

    If you believe the IRS is wrong, you have the right to dispute the notice. For a CP2000, check the "I do not agree" box, provide a written explanation, and include supporting documentation (corrected 1099, proof of withholding, cost basis for a stock sale, etc.). For audit notices, you may need to provide substantial documentation. A CPA can help draft a clear, well-supported response that addresses the IRS's specific concerns without volunteering unrelated information.

  3. 3

    Pay or Set Up a Payment Plan

    If you owe and can't pay the full amount, you still have options. The IRS offers installment agreements (monthly payment plans) for qualifying taxpayers. You can apply online, by phone, or by submitting Form 9465. For larger debts, an Offer in Compromise — settling for less than the full amount — may be possible if you can demonstrate financial hardship. A CPA can help negotiate the best resolution and handle the paperwork.

When to Handle It Yourself vs. When to Hire a CPA

Not every IRS notice requires a CPA. Here's a practical guide to help you decide:

You Can Probably Handle It Yourself If:

  • The notice is a simple math error and you agree with the correction
  • The notice asks for a missing form you have on hand
  • The notice is informational (e.g., confirming a payment received or address change)
  • It's a 5071C identity verification — you can complete this online in 10 minutes

Hire a CPA If:

  • The notice proposes a large amount of additional tax (more than a few thousand dollars)
  • You've received an audit notice (Letter 566, 2205, or similar)
  • You've received a collection notice (LT11, Letter 1058) or lien/levy threat
  • You disagree with the IRS's position and need to build a documented response
  • The issue spans multiple tax years or involves complex areas (foreign income, business deductions, trust income)
  • You're simply anxious or unsure — peace of mind and professional representation are valuable in themselves
Watch Out For

What NOT to Do When You Receive an IRS Notice

Common Mistakes to Avoid

  • Do not ignore it. IRS notices don't go away. Ignoring a notice triggers escalating enforcement — additional penalties, interest, liens, bank levies, and wage garnishments.
  • Do not throw it away thinking it was a mistake. Even if the notice seems wrong, you must respond. The IRS does not know there's an error unless you tell them, in writing, with documentation.
  • Do not call without preparing first. Have the notice, the tax return for the year in question, and any relevant documents in front of you. IRS phone wait times can be long — be ready.
  • Do not send original documents. Always send copies. Keep the originals for your records. Use certified mail with return receipt so you have proof of timely response.
  • Do not assume "this is the end of it" after one call. IRS resolution often takes multiple rounds of correspondence. Follow up if you don't hear back within the timeframe stated in the notice.
  • Do not pay without understanding what you're paying for. If the notice is a CP2000, it's a proposal — not a final bill. Paying it without reviewing it is treated as agreeing to the proposed changes. Make sure the IRS's numbers are right first.
  • Do not send sensitive personal information through unsecured channels. Use the IRS's secure online portal or mail. Do not email SSNs, dates of birth, or bank account numbers.
FAQ

Frequently Asked Questions

Should I ignore an IRS notice if I think it's wrong?
No. Never ignore an IRS notice, even if you believe it's incorrect. Ignoring a notice can lead to automated assessments, penalties, interest accrual, federal tax liens, and eventually bank levies or wage garnishments. If the IRS has made an error, you can dispute it — but you must respond in writing within the timeframe stated on the notice. The IRS does not know there's an error unless you tell them, with documentation. Not responding is the single worst thing you can do.
How long do I have to respond to an IRS notice?
Most IRS notices give you 30 to 60 days to respond from the date of the notice, though the exact deadline varies by notice type. CP2000 notices typically allow 30 days. Collection due process notices (LT11, Letter 1058) give 30 days to request a CDP hearing. Identity verification notices (5071C) should be addressed promptly to avoid refund delays. Always check the date printed on your specific notice and note that the clock starts from the notice date, not the date you received it in the mail.
Can a CPA talk to the IRS on my behalf?
Yes. A CPA, enrolled agent, or tax attorney can represent you before the IRS once you sign Form 2848 (Power of Attorney and Declaration of Representative). After authorization, your representative can call the IRS, respond to notices, attend audit meetings, and negotiate payment arrangements on your behalf. For many clients, having a professional handle IRS communications reduces stress and often leads to better outcomes.
What's the difference between a CP2000 and an audit?
A CP2000 is not an audit — it's an automated underreporter notice generated when the IRS's computer matches income reported to them (via W-2s, 1099s, etc.) against what you reported on your return. An audit (also called an examination) is a more detailed review of your return, often focusing on specific deductions, credits, or income items. CP2000s are far more common than audits and are often resolved with a simple response. Audits require more documentation and are where professional representation is especially valuable.
What if I can't pay what the IRS says I owe?
If you agree that you owe but cannot pay the full amount, you have several options. You can request an installment agreement to pay over time (online, by phone, or with Form 9465). For qualifying taxpayers, a short-term extension of up to 120 days may be available. If you're facing significant financial hardship, an Offer in Compromise may allow you to settle for less than the full amount — though these are difficult to obtain. A CPA can help you evaluate which option fits your situation and prepare the necessary forms.
Will receiving an IRS notice affect my credit score or passport?
Receiving a notice itself does not affect your credit score. However, if a tax debt goes unpaid and the IRS files a Notice of Federal Tax Lien, that lien becomes a public record and may appear on your credit report. Additionally, the IRS can certify seriously delinquent tax debt (generally over $59,000, adjusted for inflation) to the State Department, which may result in passport denial or revocation. Addressing the notice early prevents escalation to these outcomes.
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IRS Circular 230 Disclosure: Any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding federal tax penalties or promoting, marketing, or recommending any transaction or matter addressed herein.

Important: Do not send sensitive personal information such as Social Security numbers or banking details through unsecured forms or email. Use our secure client portal for document uploads. The information on this page is for general informational purposes only and does not constitute professional tax advice. Every taxpayer's situation is unique — please consult with a CPA regarding your specific facts and circumstances.