IRS Notices and Letters – What They Mean & What to Do

Business_Tax_ProblemsDid you receive an IRS letter or notice? Don’t panic too much about the letter, most of these letters come off in a harsh tone but can be resolved through a few steps. Below are some normal IRS letters that the IRS sends. Each notification contains a description of what the letter is for and what are the appropriate actions to take in order to respond and resolve the problem the letter is addressing. Although the IRS is systematic, sometimes notices can be skipped if you have had problems in the past and for other reasons.

CP 11 - IRS Notices & Letters Changes to Tax Return

This notice is sent to a taxpayer to show that there was a change made to the tax return and that change resulted in a balance being due to the IRS.

CP 22A - Data Processing Adjustment Notices, Balance Due of $5 or More

This letter is sent to a taxpayer when a data processing adjustment has resulted in a balance being due on the account.

CP 22E - Examination Adjustment Notice, Balance Due

This notice is sent when an exam tax adjustment was made to your account which resulted in a balance of $5 or more.

CP 23 Estimated Tax Discrepancy, Balance Due

If you receive this letter from the IRS it is to tell you that there is a difference between the amount of money posted to your account and the amount of Estimated Tax Payments that were claimed on your tax return.

CP 88 - Delinquent Return Refund Hold

The IRS has the right to hold your refund. This notice is sent to tell you that your refund is being held because you did not file a tax return in a previous year. Even if you are due a refund, you are not entitled to receive it until you have filed all necessary returns.

CP 90/CP 297/CP 297A - Notice of Levy and Notice of Your Right to a Hearing

This letter is sent to let you know of the intent to levy federal payments that are due to you. This can include a salary, Social Security benefits, or OPM retirement benefits. There are also other items that are subject to levy and can be included in a CP 90/CP 297 notice such as real estate, bank accounts, car, business assets, commissions, and wages.

CP 91 / CP 298 - Final Notice Before Levy on Social Security Benefits

This notice is sent to inform the taxpayer that the IRS intends to levy their social security benefits. If the right actions are not taken the IRS will take up to 15% of social security benefits that the taxpayer receives.

CP 161 - Request for Payment or Notice of Unpaid Balance, Balance Due

This notice shows underpaid taxes. You will also be sent details on how much tax you reported paying, as well as any credits that have been applied to your account.

CP 14 - Balance Due

This notice is sent to a taxpayer to show the amount of underpaid tax or a balance in terms of taxes owed. There is a section on the form that details the tax you reported, the credits that were applied, and the amount of the underpayment.

CP 501 - Reminder Notice, Balance Due

This IRS letter is one of the most simple and straightforward and typically follows CP-14. This is sent to notify you of a balance due. This is the second notice that the IRS sends to let you know about the money you owe.

CP 503 - Second Request Notice, Balance Due

This notice is sent to inform you that a balance is due on your account. It is the second request notice that is sent by the IRS for an unpaid balance. If you receive a CP 503 notice, in most cases it means that you did not respond to the CP 501 or take the proper action.

CP 504 - Final Notice, Balance Due

This letter is a final notice of a balance that is due on your account. This is usually the fourth notice that is sent, and will tell you that a levy will be issued against your state tax refund. It may also include details stating that the IRS plans to search for other assets on which a levy can be placed. Additionally, a Federal Tax Lien may also be filed if you do not pay at once.

LT11 or L1058 - Final Notice of Intent to Levy

This formal letter is normally sent a few weeks after you fail to respond and address CP 504 by paying the taxes you owe or by setting up a payment agreement with the IRS. It can be from an IRS office in the area. Typically, you have 30 days (from the data of the letter) to resolve the situation before the IRS levies your bank account(s), wages, and other assets.

CP 523 - Notice of Default on Installment Agreement

When you setup an installment agreement with the IRS you promise to pay a particular amount of money every month. A CP 523 notice is sent if the IRS is going to cancel your installment agreement. It will include information for the reason of termination. Common reasons include: you missed a payment, you did not file your tax return, and/or you have added a new balance due to the IRS.