The IRS’ job of making sure everyone is paying their taxes is no easier than you collecting and reporting all of your information without a single flaw. Unfortunately, the repercussions of failing to file, falling behind, or falling into debt weigh far heavier than many realize. Any mistake, big or small, hardly ever goes unnoticed by the Internal Revenue powers that be. Flaws in your file generally result in you becoming a recipient of a dreaded IRS notice.
Though many notices are innocent tax-related alerts that require immediate attention, ignoring them or putting them off can result in serious consequences. These common IRS notices are nothing to panic about, but we’ll walk you through their meanings and how to to deal with them.
5 Common IRS Notices
If you received a CP501 or CP502 notice, that means you have a past IRS balance due. Within this letter you should find the following information.
- The amount you owe
- The year from which the tax debt is due
- The proposed interest you can expect to accrue
- The due-by date for payment
Failure to pay could result in property seizing, garnished paychecks, a lien on future tax refunds, or taxes levied against your property. Depending on your debt, the IRS could collect for many years to come. If you find yourself in a tough financial spot, look into hiring a tax professional to negotiate the debts or help set up a more affordable payment agreement.
2. Letter 12C
If you received a Letter 12C in the mail, you can rest assured knowing that the IRS just wants a little bit of clarification to properly assess and process your tax return. This could mean anything from missing forms to support your filings or simple verification of income. The best way to handle a Letter 12C is to reply as soon as possible. Even if you disagree with the claims in the letter, you can pen a letter back detailing why you find the information inaccurate.
Letter 12C also includes a fax number to allow quick correspondence. Be sure to include a copy of the letter with your response as well. If you are replying by post, make sure you send via certified mail to obtain proof of mailing.
CP01 notices are mailed out to taxpayers whose accounts have been attacked by identity thieves. This notice requires no action by the recipient, so you can sleep soundly knowing the IRS is taking care of any funky fraudulent business. It then becomes the IRS’ responsibility to monitor your account for any unusual activity. This notice should also prompt you to carefully handle all of your confidential financial documents. Be wary of trashing or deleting important information that could be used to later help fix a fraud case.
If you become the recipient of a Letter 2205,you have been selected for an IRS audit. Audits are issued to taxpayers who may not have reported entirely accurate information. This is especially common with professionals who have a fruitful side gig or work from home. Within this notice you will find the examiner’s name, phone number, and office location. The letter will also contain all information about what exactly is being considered for thorough examination. If the IRS has not included an outline of the issues with your return at the bottom of Letter 2205, they will send Form 4564 or Form 886A for further questioning. Be sure to respond within 7 days to avoid any penalties or additional taxes.
4. Letter 3219
If you receive a Letter 3219, or a letter of deficiency, from the IRS, it means you owe additional taxes. These are generally sent out to taxpayers who had the IRS propose adjustments to their returns which resulted in additional tax owed. To take care of this letter, you have three options; dispute the taxes, appeal the penalties, or make arrangements to pay the due amount. Recipients of the Letter 3219 have 90 days to respond. Failure to address the letter results in losing your right to challenge any additional taxes.
5. Letter 602
The Letter 6002 is sent to taxpayers who neglected to indicate on their return whether or not they have health care coverage. This quick fix IRS notice is simply fixed by contacting the IRS as soon as possible. Health care coverage is required by the Affordable Care Act, but those who qualified for an exemption must complete a Form 8965 to complete their claim.If you did not qualify for an exemption and did not have health care coverage for the tax year, you must calculate a Shared Responsibility Payment.