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What to Do If You Receive a Dreaded IRS Letter

If you receive an IRS notice, your first step should be to not panic. You may have overlooked a capital gain or income statement. It is also possible that the IRS has caught someone else using your SSN to file or otherwise steal your identity.


Now that most tax refunds are deposited directly into taxpayers’ bank accounts, the dream of opening your mailbox and finding an IRS refund is all but gone. However, the IRS still sends letters that can increase taxpayers’ heart rates; because of extensive computer matching, the IRS does most of its auditing through correspondence.

CP-Series Notice – When the IRS detects a potential issue with your tax return, it will contact you via U.S. mail; this is called a CP-series notice. Please note that the IRS’s first contact about a tax delinquency or discrepancy will never be a phone call or email. Such calls and emails are a common tool for scammers; if you get one, simply hang up the phone or delete the email. If you are concerned about the validity of a given message, please call this office.

Most commonly, CP notices describe the proposed tax due, as well as any interest or penalties. The notice will also explain the examination process and describe how you can respond.

These automated notices are sent out year-round, and they are quite common. As the IRS tries to close the tax revenue gap, it has become more aggressive in its collection efforts. In addition, since many taxpayers now use low-quality tax mills or do-it-yourself software, the number of notices sent because of preparer errors has increased. Missed checkboxes, misunderstandings of available credits, and overlooked income all add up to more errors.

The first step in this automated process involves matching what you reported on your tax return to the data that third parties (e.g., employers, banks, and brokers) reported. When this information does not agree, the automated collection effort begins.

Do Not Panic – These notices often include errors. However, you do need to respond before the 30-day deadline or you could face significant repercussions. The notice may even be related to suspected ID theft. For instance, someone may have gained access to your tax ID (social security number) (or that of your spouse or one of your dependents) and tried to file a return using the stolen ID. The first step is to determine which type of notice you have received.

A CP2000 notice is very different from the other CP notices which deal with issues such as identify theft, audits, and the earned income credit. The CP2000 notice includes a proposed—almost always unfavorable—change to your tax return, and it gives you the opportunity to dispute the proposed change. Procrastinating or ignoring this notice will only cause the IRS to ratchet up its collection efforts, which in turn will make it more difficult for you to dispute the proposed adjustment.

Sometimes, the IRS will be correct. You may have overlooked a capital gain or income from a second job. It is also possible that the IRS has caught someone else using your SSN to file or otherwise steal your identity. Quite frequently, however, the IRS is incorrect, simply because its software isn’t sophisticated enough to pick up all the information that you report on the schedules attached to your return.

 When you receive an IRS notice, your first step should be to not panic and contact your tax advisor or this office. We review our clients notices and determine whether it is correct, and then we will consult with you to determine how best to respond.

Please check with your Curran Wealth relationship manager, 
or contact Curran Wealth Management if you have any questions.
 518.391.4200
info@curranllc.com

The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness.  The contents of this article are based on the tax laws existing at the time of publication.  Tax laws are subject to continual change.  In addition, tax laws vary by state.  This article is not, and should not be regarded as tax advice.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.  If you would like a detailed analysis of your tax situation, with specific tax recommendations, you can discuss the possibility of pursuing a formal relationship with Hippo Tax Services.