If you recently received a letter from the IRS – don’t panic. While the dream of finding an IRS refund check in the mailbox is over now that most tax refunds are deposited directly into taxpayers’ bank accounts, IRS correspondence by mail is still flourishing. Since the IRS does the majority of auditing through correspondence, an IRS letter can likely increase your heart rate and, in some cases, ruin your day.
CP-Series Notice – What This Letter From the IRS Means
When the IRS thinks it detects a potential issue with your tax return, it will contact you via U.S. mail. Mail correspondences uses 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 of scammers; if you get one, simply hang up the phone or delete the email. If you are concerned about the validity of a given IRS 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 IRS letters 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. Also, as many taxpayers now use seasonal tax pop up shops or do-it-yourself software, the number of notices sent due to “preparer error” have significantly increased. Missed checkboxes, misunderstandings of available credits, and overlooked income all add up to more errors.
The first step the IRS uses 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 add up, the automated collection effort begins.
If You Receive a Letter from the IRS, Don’t Panic
These notices often include errors. However, you do need to respond before the deadline specified on the notice (usually 30 days) or else face significant repercussions. The notice may even be related to suspected ID theft. For instance, someone may have gained access to your tax ID (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.
CP2000 notice
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. This 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. For example, when a scammer steals your identity and files a tax return in your name – but to their address! Frequently, however, the IRS is incorrect. And it’s simply because its software isn’t sophisticated enough to pick up all the information that you report on the schedules attached to your return.
These notices of proposed change will also include penalties and interest. Even if you do owe the tax, this office may be able to get the penalties and interest abated for due cause.
When you receive an IRS notice, your first step should be to immediately contact this office at (360) 778-2901 and provide us with a copy of the notice. We will review the notice to determine whether it is correct, and then we will consult with you to determine how best to respond.
Charity Auctions and Tax Deductions
