Welcome to correspondence season! Correspondence season is the term that tax professionals use to describe the period after tax season officially ends. Many taxpayers think that the Internal Revenue Service (IRS) takes a break in May and June, but that’s not the case. As the IRS processes tax returns, the systems are at work matching taxpayer data, analyzing changes in patterns, checking for missing information and the like. The result? Those notices that show up in your mailbox. Those correspondences – hence the name – generally require taxpayers to respond in some form. Here’s what you need to know.
The most popular notice in mailboxes during correspondence season is the IRS Notice CP2000. It looks like this:
A CP2000 sounds very space age but has been around forever. The purpose of the CP2000 is to propose a change in tax. Typically, a CP2000 shows up when income reported from third-party sources (like your employer) does not match what you entered on your tax return. For example, if your form W-2 indicates that you earned $25,000 in wages, but you reported $24,000 on your form 1040, you’d likely receive a CP2000. It’s important to read the notice carefully because it provides instructions about what to do next.
The notice isn’t a formal audit or a bill. The purpose of the notice is to advise you of the discrepancy in reporting and confirm whether you agree or disagree with the proposed tax changes.
You normally have 30 days to respond:
- If you agree with the proposed tax changes, you would sign and return the notice.
- If you don’t agree with the proposed changes, you would indicate on the form that you disagree with some or all of the changes, and return the notice with an explanation and supporting documentation. At that point, the IRS will review your form and either agree with your explanation (best case) or send you another letter stating they do not agree with your explanation (you may be asked to provide more information).
If you have questions about the process, the CP2000 includes a phone number. You can call for more information.
Another letter that shows up in mailboxes around this time of year is the IRS Notice CP3219, Statutory Notice of Deficiency (more commonly referred to as a 90-day letter or Notice of Deficiency).
The CP3219 typically follows the CP2000. Here’s what it looks like:
If you don’t respond to the CP2000, or if the IRS doesn’t agree with your explanation in response to the CP2000, they’ll send you a Notice of Deficiency, which explains the proposed changes to your taxes and how the agency arrived at that decision. The notice also informs you of your right to petition the United States Tax Court if you don’t agree with the changes.
Like the CP2000, the CP3219 isn’t a bill. However, you do have the option of paying the tax and closing the matter. If you agree with the proposed changes on the Notice of Deficiency, the IRS asks that you complete, sign and return a form 4089 (included with your letter). You can send payment with that form, or the IRS will later send you a bill together with any interest and applicable penalties.
If you don’t agree with the additional tax as proposed, you have a couple of options:
- You can respond to the Statutory Notice of Deficiency directly; or
- You can petition the United States Tax Court by the due date shown on the notice.
If you respond to the Notice by sending additional information to IRS, it’s important to understand that your response does not extend the deadline to file a petition with the Tax Court. You have 90 days from the date of the Notice – hence the name – to file the petition. No extensions.
Of course, with all of these notices going out, you know who will be on top of this, right? Scammers. The IRS is again reminding taxpayers to be on the lookout for tax scams, which can occur through email, on the phone or through the mail. If you receive a CP2000 notice and you’re not sure if it’s valid, you can always reach out to the IRS directly (try calling 1.800.829.1040). You can also check the IRS website for more information.
(To see an example of a CP2000 scam from 2016, click here.)
Remember that the IRS will never:
- Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
- Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- Require you to use a specific payment method for your taxes, such as a prepaid debit card, gift card or wire transfer.
- Ask for credit or debit card numbers over the phone or email.
Here’s what to do if you receive a suspicious phone call, letter or message:
- If you receive a call from someone claiming to be from the IRS, and you do not owe tax, or if you are immediately aware that it’s a scam, don’t engage with the scammer and do not give out any information. Just hang up.
- If you receive a telephone message from someone claiming to be from the IRS, and you do not owe tax, or if you are immediately aware that it’s a scam, don’t call them back.
- If you receive a suspicious letter or call from someone claiming to be with the IRS, do not give out any information. Call the IRS directly at 1.800.829.1040 to discuss your specific situation.
Don’t fall for the tricks. Keep your personal information safe by remaining alert. When in doubt, assume it’s a scam. For tips on protecting yourself from identity-theft-related tax fraud, click here.