Common IRS Letters and What They Mean

Nobody likes checking the mail to find a letter from the IRS sitting there. It’s a common source of anxiety for many people, especially when they open it just to find a bunch of tax jargon and have no idea what any of it means. The IRS can issue a letter for a multitude of reasons ranging from missing information, identity verification, additional refund due, additional tax owed, all the way to examination and collection. Not all letters are bad, but they can create confusion and raise questions and uncertainty.

First things first, and excuse me while I state the obvious and most ‘easier said than done’ thing I could say right now: don’t panic. Seriously, don’t. Panicking creates more stress and when stress is elevated it can be more difficult to focus and comprehend what the letter is requesting as well as prevent an appropriate response. The worst thing you could do is ignore it. I promise, ignoring it won’t make it go away. In fact, it can very well compound the problem and turn it into something that could have been completely prevented had the initial letter not been ignored.

Read the notice very carefully and respond with the information they are requesting. And hey, if it is easier for you to contact a professional to walk you through the letter and prepare a response on your behalf do so. That’s literally what they’re there for and they have experience in dealing directly with the IRS on taxpayer’s behalf.

In the meantime, I have compiled a list of some of the more common IRS letters that taxpayers may receive and a short description of what they mean.

1. Letter CP2000 – IRS Identified Discrepancy or Error – This is the most common letter taxpayers receive. This letter is generated when the income information within your prepared return isn’t matching what the IRS has on file. This is generally accidental and also easily fixable.
2. Letter 12C – Additional Information Needed – This letter is generated when the IRS needs more information to process the tax return. This could be missing forms, schedules, calculations, or other information that supports the entries on the main form. The IRS could also need verification of the income, withholding, or credit amounts claimed. This letter must be responded to to complete the processing of your return and issue your refund.
3. Letter 4883C – Identity Verification – This letter tends to have taxpayers terrified of identity theft. This isn’t necessarily the case. Of course, if you receive this letter and did not file your tax return for the year specified, then you may have an identity theft situation. Most of the time, this isn’t the case, and the IRS just wants to verify your identity. When you call the number stated in your letter, be sure to have everything requested ready.
4. Letter 525 – Examination Report – This is commonly referred to as the 30-Day Letter in the tax world. It comes after an IRS examination (or audit) and informs the taxpayer of the proposed changes. This letter must be responded to within 30 days of the notice date otherwise you may lose the right to appeal the decision.
5. Letter 3219 – Statutory Notice of Deficiency – This is commonly referred to as the 90 Day Letter in the tax world. It is issued when the IRS has determined that there is a deficiency in tax paid and after they issued an examination report and notice to appeal (30-Day letter) that went without response. This letter informs you of your right to file a petition with the US Tax Court if you disagree with the decision. If you ignore this letter or do not file a petition with the US Tax Court, then you will waive all appeal rights within the IRS and the IRS will then start collecting the taxes they determined that you owe.
6. Letter 1058/LT11 – Intent to Levy – This letter is issued after the IRS has exhausted all other efforts to collect the tax due on your account. You must contact the IRS immediately at the number listed on the front page of the letter.
7. Letter 668W – Wage Levy or Garnishment Notice – This letter was issued to employers after the IRS has made numerous attempts at collecting the tax due on your account through voluntary payment. When an employer receives this letter, they are legally obligated to act on the letter within 10 days otherwise they become personally responsible. They will give you paperwork to fill out within 3 working days otherwise your employer may end up withholding more of your pay than what is necessary.

If you take one thing away from this entire thing, take this – do not ever ignore a letter from the IRS and don’t delay communication with the IRS for any longer than is necessary. Consult with a tax professional who is experienced in handling tax matters before the IRS who can guide you through the process or even lessen the stress and handle the process for you.