The most common reason for an IRS (IRS.gov) letter is to notify a taxpayer that they have a balance due on their tax account. These letters, often called notices, frequently address discrepancies, such as a smaller or larger refund than expected, a change made to a return by the IRS, or the need to verify identity.
If you receive an IRS notice or letter
We may send you a notice or letter if: You have a balance due. Your refund has changed. We have a question about your return.
It may be about a specific issue on your federal tax return or account, or may tell you about changes to your account, ask you for more information, or request a payment. You can handle most of this correspondence without calling or visiting an IRS office if you follow the instructions in the document.
Getting a letter from the IRS can make some taxpayers nervous – but there's no need to panic. The IRS sends notices and letters when it needs to ask a question about a taxpayer's tax return, let them know about a change to their account or request a payment.
You know the IRS might be investigating you through official mail (first contact), phone calls (often with automated messages to IRS.gov), or in-person visits, but signs of a criminal probe include contact with IRS Criminal Investigation (CI) agents, subpoenas to you or your bank, questions to your accountant/bank, unusual account activity (freezing/refusing transactions), or agents suddenly going silent after an audit. Key indicators are official IRS letters, contact from CI special agents, third-party inquiries, and formal summonses for records, signaling serious scrutiny beyond a simple audit.
Not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.
The government has no legal obligation to notify you that you're under investigation. There is no constitutional right to know that prosecutors are building a case against you.
An IRS audit letter typically contains the taxpayer's name, tax ID number, contact information, and a request for additional documentation to support claims on the tax return. It may also include the name of the IRS officer handling the case and invite the taxpayer to a meeting.
The IRS waits to record most tax liens until after it has sent all five notices in the collection notice stream and hasn't received payment. You'll want to avoid a Notice of Federal Tax Lien. Liens can affect your ability to attract new business clients, secure and maintain credit, and obtain employment.
Check which tax year the notice is for and follow the instructions provided; you usually have 30 days to respond. Compare the IRS adjustments to your records and tax return. If you agree with the notice, indicate that on the response form and send a check or money order for any additional taxes due.
You can find digital copies of most IRS notices in your online account, under the 'Notices and Letters' section.
A notice may reference changes to a taxpayer's account, taxes owed, a payment request or a specific issue on a tax return. Taking prompt action could minimize additional interest and penalty charges.
How to Respond to a Letter From the IRS
If a taxpayer receives an IRS letter or notice, they should: Not ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. The notice or letter will explain the reason for the contact and gives instructions on what to do.
We typically contact you the first time by mail delivered by the U.S. Postal Service. To verify it's us, search IRS notices and letters. Some letters are sent from private collection agencies.
Remember, you will be contacted initially by mail. The IRS will provide all contact information and instructions in the letter you receive. If we conduct your audit by mail, our letter will request additional information about certain items shown on the tax return such as income, expenses, and itemized deductions.
The IRS $600 rule refers to a change in reporting requirements for third-party payment apps (like Venmo, PayPal) for taxable income from goods and services, where platforms must send a Form 1099-K if you receive over $600 in a year, intended to capture gig economy/side hustle income, though delays and phased implementation have adjusted the timeline, with current rules for 2024 using a higher threshold ($5,000) before fully phasing to $600 for future years, but remember all taxable income, regardless of form, must always be reported.
The IRS generally considers filing a Federal Tax Lien when you owe $10,000 or more and haven't resolved the debt after demand, but there's no strict minimum, as they can file for less if you're trying to avoid payment (like transferring assets) or for businesses with payroll issues. A lien is a public notice of the government's claim on your property, making it hard to sell or refinance, but it's not an immediate seizure.
IRS Audit Red Flags 2023: 25 Tax Return Audit Risk Factors
Filers most commonly receive letters from the IRS notifying them of the examination in the fall or winter months of the previous tax filing year. Yet, the auditors can mail the notifications throughout the year.
Don't Express Personal Opinions or Judgments. The investigation is not about how you feel or what you think. Its purpose is to collect facts and make a decision based on those alone.