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IRS Most Common Tax Notices and What They Mean

The IRS has redesigned its correspondence notices to be more “user friendly.”  This is supposed to make their notices easier to understand and therefore allow responses to occur in a more effective and efficient manner.  IRS tax notices will now include a “plain language explanation” stating the reason for the correspondence and the action required to resolve the notice.  Each notice should contain the tax year and a “notice” or “letter number” on the top right-hand side of the first page.

 

Some of the most common IRS tax notices received are:

 

CP10: If this notice is received, then the IRS has adjusted an item in your current year’s tax
return and because of this change they have also adjusted the estimated tax applied to next year.  It is important to alert your tax advisor of this notice because the change the IRS made affects more than one tax year, one of which you have yet to file.

 

CP11: If this notice is received, then the IRS has adjusted an item in your current year’s tax
return and because of this change you now owe additional taxes.  Before you write a check, call your tax advisor for advice!

 

CP23: If this notice is received, then the IRS has adjusted the amount of estimated tax payments on your current year’s tax return and because of this change you now owe
additional taxes.  You’ll likely need to get copies of canceled checks to prove estimated taxes were made.  There is a chance that one of your payments was mistakenly not made or it was applied to the wrong tax year.

 

CP24: If this notice is received, then the IRS has adjusted the amount of estimated tax payments on your current year’s tax return and because of this change you have an
additional overpayment that was refunded.  Don’t cash the refund check until you verify with your tax advisor that the refund is correct!

 

CP54G: If this notice is received, the IRS is having a problem matching the name and social security number reported on the tax return compared with the information received from
the Social Security Administration.  You should review your Social Security card, as well as your spouse’s, and/or your dependents’ social security cards to ensure that the names on the cards match exactly with how you report the names on your tax return.  In many instances, this notice is generated after a year of marriage or adoption, when social security cards may not have been updated yet.  The names reported on your tax return should always match the names on the most recently applicable social security cards.

 

CP161: If this notice is received, then the IRS is requesting a payment on a balance due or unpaid balance.  This notice is usually received as a follow up to another notice.  You
will need to reference the first notice in order to determine why there is a balance due.  Sometimes this notice is received because you filed your return with a balance due, but did not pay the tax in full.  You (or your tax advisor) should contact the IRS and request a payment agreement, if necessary.

 

CP2000: If this notice is received, then the IRS is proposing changes to your tax return based
on information that they received from your employer, bank and/or other third party payers.  This notice is generally referred to as a “matching notice.”  Sometimes, the IRS computer system is having a hard time matching to items that actually were reported on your originally filed return.  Therefore, a careful review of your return compared to the notice is necessary to see if they “match.”

 

CP2501: If this notice is received, then the IRS does not agree with the income that was
reported.  You should consult with your tax advisor to figure out what the discrepancy is.

 

CP2005: If this notice is received, then the IRS has accepted the information previously sent.  This notice is sent as a follow up to many of the other notices listed above. Basically, if you get this notice, the IRS is saying, “Hey you were right, you don’t owe any more taxes!” This is a notice to rejoice about!

 

When IRS tax notices are received it is very important to send them to your tax advisor in order to update your account and to determine if any adjustments are needed in the current
year and/or future years tax files.  Your tax advisor should recommend the steps needed in order to respond to the notice and determine if any additional taxes, interest and penalties are due.  You should request that your tax advisor carbon copy you on any correspondence sent to the IRS on your behalf.