You got an IRS notice. Here is what to do next.

An envelope from the IRS is never welcome, but many notices are routine. Many are about a math error, a missing form, a payment that didn’t post the way it should have, or income a third party reported that doesn’t match your return. The worst response is no response. A calm, organized reply usually resolves things faster and on better terms than silence does.

Here’s how to work through it.

First, don’t ignore it

Unanswered notices don’t go away. They tend to escalate, and interest and penalties on any unpaid balance generally keep growing while the issue sits. Some notices also carry deadlines that protect your rights, such as the window to request an appeal or to petition the Tax Court, and those deadlines may not be extendable.

Open it the day it arrives, then find two things:

• The notice or letter number. It’s printed on the notice, typically in the upper right corner, and looks something like “CP14” or “LTR” followed by a number. That number tells you, and anyone helping you, exactly what kind of notice it is.
• The response date. Notices generally state the date by which the IRS wants a reply or payment. Put it on your calendar right away.

Keep the envelope and every page of the notice together.

Make sure it’s genuine

Scammers impersonate the IRS constantly, so confirm the notice is real before you act on it.

• The IRS initiates most contact by regular mail. Be wary of an unexpected call, text, email, or social media message that claims to be the IRS, especially one demanding immediate payment or threatening arrest.
• Watch how you’re asked to pay. The IRS says it won’t call to demand immediate payment using a specific method such as a prepaid debit card, gift card, or wire transfer.
• Verify independently. Log in to your IRS online account to see your balance and notices, or call the IRS using a phone number you find on IRS.gov. Don’t use a phone number, link, or address from a message you aren’t sure about.

If something feels off, stop and verify before you share any information or send any money.

Read what it’s asking for, then decide how to respond

Notices look alike, but they ask for very different things. Most fall into a few categories:

• Balance due. The IRS says you owe tax, penalties, or interest. A CP14 is a common example.
• Proposed adjustment. The IRS is proposing changes to your return, often because information from employers, banks, or other payers didn’t match what you reported. A CP2000 is a common example. It’s a proposal, not a final bill, and you can agree or respond.
• Missing return. IRS records show a return that wasn’t filed.
• Identity verification. The IRS wants to confirm you actually filed the return before it processes it or issues a refund.
• Examination. The IRS is auditing a return, either by mail or in person, and is asking for records.

Read the whole notice, including the explanation pages. It will usually say what the IRS thinks happened, what it wants from you, and what your options are.

Gather your records. Pull the return the notice refers to and the records behind the items in question: the W-2s and 1099s, bank statements, invoices, receipts, prior correspondence, and anything else that supports what you reported. Compare the IRS’s figures against your return line by line.

Then decide which of three paths you’re on:

• Agree. If the IRS is right, follow the instructions to accept the change and pay, or set up payment if you can’t pay in full.
• Respond with documentation. If the IRS is missing information, such as your cost basis in an asset you sold or a payment it didn’t apply, send a clear written explanation with copies (never originals) of the supporting documents.
• Dispute. If you disagree with the IRS’s position, the notice will explain how to contest it, which may include requesting an appeal. Follow the instructions exactly, and respond by the date on the notice.

Whatever you send, keep a copy of the full package, and use a delivery method that gives you proof of when you sent it.

If you owe money, or penalties were added

Owing more than you can pay right now is common, and the IRS has options for it. Payment plans, also called installment agreements, let you pay over time, and short-term extensions to pay may also be available. In some cases, taxpayers who can’t realistically pay the full amount may qualify for other arrangements. Interest and some penalties generally continue while a balance is outstanding, so paying what you can now still helps.

Don’t let an inability to pay stop you from responding. Contacting the IRS and setting up an arrangement is almost always better than waiting for collection to escalate.

If penalties were added, relief may be available in some circumstances. Two common paths:

• First-time abatement. An administrative relief option that may apply to taxpayers with a clean recent compliance history.
• Reasonable cause. Relief that may apply when you exercised ordinary care but couldn’t comply because of circumstances outside your control, such as a serious illness, a disaster, or being unable to obtain records.

Neither is automatic, and whether to grant relief is the IRS’s decision. A well-documented request, made at the right time, gives you the best chance of a fair hearing.

When to bring in a representative

You can handle many simple notices yourself. It makes sense to bring in help when the notice involves an examination, a large proposed change, several tax years, a business return, a notice you don’t understand, or a deadline that’s close. It also makes sense if you’d simply rather not be the one talking to the IRS.

A CPA can represent you before the IRS once you sign a Form 2848, Power of Attorney and Declaration of Representative. That authorizes your representative to speak with the IRS, receive copies of notices, and respond on your behalf for the tax matters and periods listed on the form. If the matter involves potential legal exposure beyond the tax itself, talk to an attorney as well.

Goldman Tax and Advisory represents individuals and business owners in IRS notice and examination matters.