Opening your mailbox to find a letter from the Department of the Treasury is guaranteed to induce anxiety. However, the worst action you can take is to shove it in a drawer and hope it goes away. Ignoring an IRS notice guarantees that interest and penalties will compound, and it severely limits your options for fighting a dispute.
Step 1: Read the Notice Carefully
The IRS sends millions of letters every year, and most of them are not audits. The letter will have a notice number in the top or bottom right corner (e.g., CP2000, LTR 3219). This code dictates exactly what the letter is about. Common reasons include:
- They found a math error on your return and corrected it.
- Your payment was not applied correctly.
- A third party (like a bank or contractor) reported income that was not on your return.
- They are requesting additional information to verify your identity.
Step 2: Do Not Automatically Pay It
If the letter claims you owe thousands of dollars due to an "underreported income" issue, do not immediately write a check. IRS automated systems frequently make errors, particularly regarding stock basis reporting or duplicate 1099s. If you pay the balance, it is much harder to get that money refunded later.
Step 3: Collect Your Proof
If the IRS is questioning a specific deduction or claiming you missed income, gather the tax return for the year in question, along with all the supporting receipts, bank statements, and 1099s. You have the right to dispute their findings.
Step 4: Contact a Professional
You have a strict window (usually 30 days) to formally respond to the notice. Calling the IRS directly can often result in long hold times, miscommunications, or accidental admissions. As an IRS-authorized e-file provider and tax professional, I can review the exact notice code, determine if the IRS is legally correct, and draft the formal, written response required to resolve the issue on your behalf.