Tax Tip Tuesday: IRS Letters

Nothing can make your blood pressure rise more than getting a letter from the IRS. But remember, getting a letter from the IRS isn’t always a bad thing. In fact, some notices are for your benefit. No matter the reason for the letter, it is very important to read it and, if necessary, act on it as soon as possible.

Many people incorrectly believe that their tax professional will also receive a copy of their letter from the IRS. However, the IRS only sends letters to the taxpayer and spouse unless they have previously signed and executed an IRS Power of Attorney for their tax preparer. Therefore, when you receive a letter from IRS you should always contact your tax preparer for assistance in understanding and responding to the letter.

The IRS assigns a number to every notice they send out. The number identifies the type of letter and is usually found in the upper right corner of the first page. Some common IRS letters are:

CP2000 Notice of Underreported Income – This is one of the most common letters taxpayers receive. It is sent by IRS when the information reported to the IRS by 3rd parties doesn’t match what has been reported on the tax return. This is not an audit but it does require a response by the date referenced in the letter.

CP21 or CP22 Notice of Changes to Your Tax Return – Based on information you provided to the IRS, your tax return was changed. Taxpayers who reported taxable unemployment on their return prior to the tax law change in mid-March will receive one of these letters when IRS adjusts the return for the unemployment exclusion.

12C Information Request – Additional information is needed to process your return. Return processing will be suspended until the information is received.

4883C Identity Verification – IRS needs the taxpayer to verify his or her identity before the return will be processed. The letter gives instructions of how to verify your identify either online or by phone. 

CP14 or Letter 501 Notice of Balance Due – This is generally the first notice that is sent after taxes are filed and there is still an outstanding balance of tax due.

CP502 Second Reminder Notice of Balance Due – This is the second notice you will receive if you have an overdue account.

CP504 Final Notice of Balance Due & IRS Intends to Levy – If the balance due is not paid in full, this is the 3rd and final notice before the IRS gets serious and starts searching for assets to levy.

CP90 Final Notice of Intent to Levy – Notice of an intent to levy your assets. The taxpayer has 30 days to appeal the levy.

Letter 3391 30 day Nonflier Letter – IRS is giving notice of a missing return. The letter includes computation of a proposed amount due based on IRS calculating the return. The calculation is not always correct and should be verified by a tax professional. The taxpayer has 30 days to appeal.

2205 Return Selected for Examination – The return has been selected for examination by the IRS. The letter gives the examiner’s name and contact information as well as a list of what items are being reviewed.

Letter 6419 – This is a new letter that will be sent to taxpayers who receive the Advance Child Tax Credit. The letter will be sent in January 2022 and should be given to your tax preparer with your other tax documents when preparing your return.

The above list is a sampling of the many letters sent to taxpayers by the Internal Revenue Service. It is always recommended that you contact a qualified tax professional for guidance and assistance in responding to IRS letters.

If you have questions and would like help from the Tax Professionals at H&R Block, please call your local H&R Block office. In Manchester TN call 931-728-9462. H&R Block Has Your Back!

*By Rosalyn Partin