First: do not panic, and do not ignore it
Most notices are automated. A computer matched something on your return to something a third party reported and found a difference. That is not an audit and it is not an accusation. Plenty of these notices are simply wrong, because the IRS matched a form you already reported under a different line, or double-counted a rollover, or missed the basis on a stock sale.
What makes a routine notice into a real problem is silence. Nearly every notice carries a deadline, and after it passes your options narrow sharply. Open the envelope the day it arrives.
Find the notice number
Every IRS notice has an identifier in the upper right or lower right corner, starting with CP or LTR. That code tells you exactly what you are dealing with. You can look any of them up at irs.gov/notices.
The ones you are most likely to see
| Notice | What it means | Typical window |
|---|---|---|
| CP2000 | Underreporter. Third-party forms do not match your return. A proposed change, not a bill and not an audit. | 30 days |
| CP14 | First notice of a balance due on a return you filed. | 21 days to pay |
| CP501 / CP503 | Reminders that a balance is still unpaid. Escalating in tone. | Stated on notice |
| CP504 | Notice of intent to levy your state refund, and a warning of further collection action. | 30 days |
| LT11 / Letter 1058 | Final notice of intent to levy and notice of your right to a hearing. This one is serious. | 30 days to request a CDP hearing |
| CP05 | Your return is under review and the refund is held. Usually no action required yet. | Wait, then follow up |
| Letter 5071C / 5747C | Identity verification needed before the return will process. | Respond promptly |
| Letter 525 / 566 | Examination. An actual audit, by mail or in person. | 30 days |
| CP3219A / Letter 3219 | Statutory notice of deficiency, the "90-day letter." Your last chance to petition Tax Court before assessment. | 90 days, and it does not move |
The 90 days on a statutory notice of deficiency, and the 30 days to request a collection due process hearing on a final notice of intent to levy. Miss either and you do not lose the argument, you lose the place to make it.
Make sure it is real
Notice scams are constant. Real IRS practice:
- The IRS generally makes first contact by mail, not by phone, email, or text.
- The IRS will never demand payment in gift cards, wire transfer, or cryptocurrency.
- The IRS will not threaten to have you arrested, deported, or your license revoked over the phone.
- The IRS will not initiate contact by email, text message, or social media to ask for personal or financial information.
- Payments go to the United States Treasury, never to an individual.
If you are unsure, do not use the phone number on the letter. Call the IRS at the number published on irs.gov, or check your account transcript online.
Then decide which of three situations you are in
You agree
Sign and return whatever the notice asks for, and pay or set up a plan by the deadline. If the amount is right, the fastest path out is the cheapest one. Interest keeps running until it is paid.
You partly agree
Very common with a CP2000. Often the IRS is right that a form exists and wrong about the amount, because it counted gross proceeds on a stock sale with no basis, or treated a nontaxable rollover as a distribution. Respond in writing, explain the correct treatment, and attach documentation. Do not just pay a number you know is wrong.
You disagree
Respond by the deadline with a clear explanation and supporting records. If the IRS does not accept it, you have appeal rights, and every notice will tell you what they are. This is the point at which having a representative earns its money.
If you cannot pay
Being unable to pay is a much smaller problem than not filing or not responding. The options:
- Short-term payment plan. Generally up to 180 days, arranged online.
- Installment agreement. Monthly payments, often set up online if you are under the balance thresholds. Penalties and interest continue but collection action stops.
- Currently not collectible. If paying anything would prevent you from covering basic living expenses, the IRS can pause collection.
- Offer in compromise. Settling for less than the full amount. Real, and far rarer than the radio ads suggest. It turns on a specific calculation of your reasonable collection potential.
- Penalty relief. First-time abatement is available to many taxpayers with a clean prior compliance history, and reasonable cause relief exists for genuine circumstances. Both are worth asking for and neither is automatic.
File the return even if you cannot pay it. The failure-to-file penalty runs at ten times the rate of the failure-to-pay penalty. More on that in how extensions actually work.
Getting help, and what that changes
You can handle a simple notice yourself, and sometimes you should. Bring in a representative when the amount is significant, when the notice is an examination or a collection action, when the IRS is proposing a change you do not understand, or when you simply do not want to spend your evenings on hold.
An Enrolled Agent, CPA, or attorney can file Form 2848 and then deal with the IRS directly on your behalf: pull your transcripts, find out what the IRS actually has, respond, negotiate, and take the phone calls. See who can represent you before the IRS for what that authority covers, and note that a preparer without a credential cannot do any of it.
What to do today
- Open the letter and note the notice number and the deadline.
- Put the deadline in your calendar with a reminder a week before.
- Find the return the notice refers to, and the documents behind the line in question.
- Decide whether you agree, partly agree, or disagree.
- Respond in writing before the deadline, and keep proof of mailing.
- If any of that feels shaky, get a credentialed practitioner involved while the window is still open.
Frequently asked questions
Is a CP2000 notice an audit?
No. A CP2000 is an automated underreporter notice proposing a change because third-party forms do not match your return. It is not an examination, and it is frequently wrong in whole or in part, often because the IRS lacks your cost basis or treated a rollover as a taxable distribution.
What happens if I ignore an IRS notice?
The proposed change generally becomes final, penalties and interest keep accruing, and the IRS moves toward assessment and then collection, including liens and levies. Ignoring a notice does not make the issue go away, it removes your chance to argue about it.
How can I tell if an IRS letter is a scam?
The IRS generally makes first contact by mail, never demands gift cards or cryptocurrency, never threatens arrest over the phone, and does not initiate contact by email or text asking for financial information. If in doubt, ignore the phone number on the letter and call the IRS using a number published on irs.gov.
What should I do if I owe the IRS money I cannot pay?
File anyway, then choose a payment path: a short-term plan, an installment agreement, currently not collectible status, or in some cases an offer in compromise. Also ask about first-time penalty abatement. The failure-to-file penalty is ten times the failure-to-pay penalty, so filing is always the first move.
Can my tax preparer respond to an IRS notice for me?
Only if they are an Enrolled Agent, CPA, or attorney, or an Annual Filing Season Program participant acting within their limited rights. With a signed Form 2848 they can pull your transcripts, respond, and negotiate on your behalf. A preparer holding only a PTIN cannot represent you at all.
Have a notice sitting on your table?
Send it over. As an Enrolled Agent I can file a power of attorney, pull your transcripts to see what the IRS actually has, and handle the response and the phone calls. Most of these are more fixable than they look, as long as we act inside the deadline.
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