Got an IRS Notice? Here's Exactly What to Do (And What Not to Do)

Your heart sinks when you see that envelope with the IRS return address. But here's the truth: the vast majority of IRS notices are routine, and most can be resolved without professional help. The key is knowing what you're dealing with and responding correctly.

Step 1: Don't Panic — Read It Carefully

Every IRS notice has a notice number in the upper right corner (CP2000, CP501, LT11, etc.). This number tells you exactly what the IRS is communicating. Read the entire notice before doing anything. Many notices are informational and require no action at all.

The Most Common IRS Notices

CP2000 — Underreported Income

This is the most common notice. The IRS received a 1099 or W-2 that doesn't match what you reported. It's not an audit — it's a proposed change. You have 60 days to agree, disagree, or provide documentation. If the income was reported correctly, respond with proof. If you missed it, you can agree and pay the difference (often with reduced penalties).

CP501/CP503/CP504 — Balance Due

These are collection notices for unpaid taxes. CP501 is the first notice, CP504 is more serious and may include a notice of intent to levy. Don't ignore these. If you can't pay in full, set up an installment agreement or explore an Offer in Compromise.

LT11 / Letter 1058 — Final Notice of Intent to Levy

This is serious. The IRS is telling you they intend to seize assets (bank accounts, wages, property) within 30 days. You have the right to request a Collection Due Process hearing, which stops the levy while your case is reviewed. Do not ignore this notice.

What NOT to Do

• Don't ignore any IRS notice — even if you think it's wrong
• Don't call the IRS without reviewing the notice and gathering documentation first
• Don't agree to a payment plan you can't afford — there are better options
• Don't assume the IRS is always right — they make mistakes frequently
• Don't respond emotionally — keep all communication factual and professional

When to Get Professional Help

Handle it yourself if: the notice is informational, you agree with a small balance due, or it's a simple CP2000 with clear documentation. Get professional help if: the amount is large, you disagree with the IRS's position, you've received a levy notice, or you're facing an audit.

An IRS notice is a communication, not a verdict. Respond thoughtfully, document everything, and know your rights. Most situations are more manageable than they appear.

Tiffany Nellums, EA