Common IRS Notices and Their Purpose

If you receive a notice in the mail from the IRS, don’t panic. A simple notice does not automatically mean you are under an audit. Actually, your chances of audit are slim.

However, the content of the notice is still important. Most IRS notices require a response quickly – typically 30 days. To respond appropriately, you must first understand what each notice means.

Here are some of the common IRS notices we see, and the reason why you might be receiving them:

Notice CP 14

Common Name: Balance Due Notice

What it Means: No one enjoys opening this notice. The IRS issues a CP 14 because you have underpaid your tax obligation. This is the first warning the IRS will send, and requires immediate action before things could get much worse. Consult with your tax preparer or CPA to determine if the claim is accurate, or was made in error. These professionals can recommend the appropriate response.

Notice CP 501

Common Name: Reminder Balance Due Notice

What it Means: If you fail to respond to Notice CP 14 in time, you will receive this notice. Responding quickly to balance due notices won’t reduce the amount you owe, or any relevant interest, but it could reduce the penalties. Notice CP 501 is the last “polite” reminder, and seizure of assets could begin after this notice is received.

Notice CP 504

Common Name – Final Balance Due Notice

What it Means: Commonly, if you are receiving this notice it is due to a balance that you cannot afford to pay. It is important to work with the IRS to set up a plan for repayment. If not, Notice CP 504 will arrive with 10 days before levies can begin getting applied to your accounts.

Notice CP 90/CP 297

Common Name: Intent to Levy and Right to a Hearing

What it Means: If you think of the previous notices as “Warning: Bridge Out Ahead” signs, Notice CP 90/CP 297 are the barricade before the ledge. In this notice, the IRS is taking control of your bank accounts and keeping you from accessing them. In these scenarios, it is always helpful to work with the IRS to the appropriate resolution.

Notice CP 49

Common Name: Overpayment Notice

What it Means: Compared to other notices, CP 49 is much more pleasant. The IRS will send you this notice if you have overpaid on your tax requirement, and if they plan to attribute it to any additional taxes you might owe.

Notice CP 23

Common Name: Estimated Tax Discrepancy

What it Means: If you are a business owner who submits estimated tax payments, you will receive this notice if the payments you claimed differ from the amounts the IRS received. Correcting this notice requires submitting evidence, such as cancelled checks for estimated payments, to prove your case.

Audit Request Notice

Common Name: People call this many different things, none can be published.

What it Means: Something within your return or your financial picture has triggered suspicion from the IRS and they would like to examine your financial data closely. If you receive this notice, meet with your CPA immediately. You will likely need representation before the IRS, and someone who can watch over the audit process to ensure accuracy.

At Marietta, we understand receiving an envelope from the IRS is the cue for your heart to drop. Often, notices do not have to represent a catastrophic event in your financial future. With diligent action and a timely response, we can help clear up most IRS issues quickly and efficiently.