Texas residents who have received notices from the Internal Revenue Service in the past know how stressful such correspondences can be. In some cases, a letter from the IRS might be notifying you that the federal tax agency found your return to contain inaccurate or misleading information and has flagged you for an audit, which could result in serious penalties and interest. In severe cases, the IRS might even pursue an audit fraud case against a taxpayer it believes has falsified his or her tax information.
However, the majority of IRS letters concern matters that are much less serious than suspected fraud. Most letters dispatched by the IRS are simply seeking extra information from their recipients and require only short responses. For instance, one particularly common IRS notice is the CP2000, a document the IRS sends to inform a taxpayer that he or she did not list a certain source of income on his or her return, such as stock dividends. A CP2000 is typically accompanied by a bill reflecting the taxpayer’s adjusted income. If her or she complies with the notice and promptly pays the listed amount, the correspondence is considered complete and generally does not result in further action.
The heading of an IRS letter should indicate the nature of the problem in question, but the body should explain in greater detail. For instance, letter reference forms 944, 941 or 940 should have to do with your payroll taxes. It is important to carefully assess the letter and cross-reference the IRS’s claim with your tax return, as the agency occasionally sends a notice in error. If you believe that the IRS has mistakenly sent you a letter, you should return the letter with copies of all of your tax documents and any receipts or records you need to prove that you have paid your taxes correctly.
Regardless of whether an IRS letter and the claims therein are valid, you should be able to resolve most notices without having to physically visit or phone an Internal Revenue Service office. However, experts recommend that you keep copies of all notices the IRS sends, including important details such as the identification numbers of all officials you spoke to and the nature of your conservations.
Source: Fox Business Small Business Center, “Got a Notice from the IRS? Don’t Panic” Bonnie Lee, Jun. 14, 2013