Tax

Tax Accountants: Guide For CP Notice Tax Audits

The Guide covers the many notices that the Internal Revenue Service sends to individual taxpayers regarding tax audits. This is an excellent guide for tax professionals and taxpayers alike

Tax Accountants: Guide For CP Notice Tax Audits

Tax Accountants Guide to Audits and other CP notices are published by the IRS. Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue.

Tax Accountants CP Notice Guide provides reference material for a vast library of notices issued by the IRS. Please note, ff you agree with the information in the notice, there is no need to contact them. The IRS does not send emails or text, so be aware of scams.

If, when you search for your notice or letter using the Tax Accountants Guide to Audits, it doesn’t return a result, or you believe the notice or letter looks suspicious, contact the IRS at 800-829-1040 or your accountant who can assist. If you determine the notice or letter is fraudulent, please follow the IRS assistor’s guidance or visit our Report Phishing page for the next steps.

To get a copy of your IRS notice or letter in Braille or large print, visit the Information About the Alternative Media Center page for more details.

Tax Accountants Guide to Audits provides reasons for IRS notices?

 The IRS sends notices and letters for the following reasons:

  • You have a balance due.
  • You are due a larger or smaller refund.
  • They have a question about your tax return.
  • They need to verify your identity.
  • They need additional information.
  • They changed your return.
  • They need to notify you of delays in processing your return.

Next steps

Read the Tax Accountants CP Notice Guide

Each notice or letter contains a lot of valuable information, so you must read it carefully. If they changed your tax return, compare the information they provided in the notice or letter with the information in your original return.

Respond

 If your notice or letter requires a response by a specific date, there are two main reasons you will want to comply:

  • to minimize additional interest and penalty charges.
  • to preserve your appeal rights if you do not agree.

Pay

 Pay as much as you can, even if you cannot pay the full amount you owe. You can pay online or apply for an Online Payment Agreement or Offer in Compromise. Visit their payments page for more information.

Keep a copy of your notice or letter

 It’s important to keep a copy of all notices or letters with your tax records. You may need these documents at a later date.

Contact us

 Tax Accountants Guide to Audits is a handy tool most Accountants and CPA’s have on hand. If you receive a notice and are not sure what to do, please contact a CPA or Accountant.

They provide their contact phone number on the top right-hand corner of the notice or letter. Typically, you only need to contact them if you don’t agree with the information, if they requested additional information, or if you have a balance due. You can also write to us at the address in the notice or letter. If you write, allow at least 30 days for our response.

Tax Accountants Guide to Audits

 The location of the notice or letter number can be found on the notice (CP) or letter (LTR) number on either the top or the bottom right-hand corner of your correspondence.

IRS Representation

If you prefer IRS representation instead of going at it alone, a taxpayer with proper written authorization can have someone else represent him/her. A taxpayer’s representative must be an individual authorized to practice before the IRS, such as an attorney, certified public accountant, or enrolled agent.

 

This notice states that your return has been changed because the IRS believes there was a miscalculation. This means you owe money on your taxes because of this. Double-check the numbers on your tax return to confirm that you actually did make a mistake.  If there was no mistake on the original return, you need to respond to the notice with an explanation.

The IRS has sent this notice because you owe money on unpaid taxes. This is the first letter sent in the collection process. It is the initial tax bill sent. The letter gives you an opportunity to pay the tax in full to prevent any collection actions. If you ignore the letter, the IRS will continue sending notices that get more and more threatening, and will eventually start taking collection actions.

This notice was sent because we have found a miscalculation in your return that affects your refund. The IRS records show that you owe other tax debts, and we used all of part of your refund to pay them. Double-check the numbers on your tax return to confirm that you actually did make a mistake. If there was no mistake on the original return, you need to respond to the notice with an explanation, otherwise the IRS will keep all or part of the refund you claimed.

This notice states that you owe money on your taxes as a result of the changes you requested on your tax return for the tax year specified. Review the notice to determine if the changes are accurate.  If they are not correct, you need to respond to the notice with an explanation as to why you do not owe any additional tax.

The IRS has made changes to your tax return as a result of your recent audit. You now have a balance due on your taxes because of this. This letter is sent at the conclusion of an audit where changes will be made. It basically summarizes the IRS audit results and the amount of back taxes you owe as a result. If you get one of these letters, and do not agree with the findings, it is important to respond to the IRS immediately to try and get the situation resolved. If you do not respond, the assessment will eventually become final, and the IRS will begin collections if you have not already paid the bill.

The IRS has made changes to your tax return for the specific year that you requested. You now have a balance due on your taxes because of this. This is similar to letter CP21A. It is informing you that the IRS has made proposed changes to your tax return, and you owe additional taxes as a result. Read the notice carefully and compare it with your tax return. If you do not agree with the changes, respond to the notice immediately with an explanation as to why you do not agree.

As a result of your recent audit, the IRS has made changes to your tax return for the specified year. You now have a balance on your taxes because of this.This letter is very similar to notice CP21E. It accompanies an audit report, and explains the changes made to your tax return. It also provides an amount you owe based on the audit. If you don’t agree with your IRS audit results, it is important to respond to the notice immediately, or the liability will become final.

The IRS used part or all of your refund to pay a tax debt. This notice explains that the IRS used the tax refund you claimed to pay back taxes owed for another year. As long as you owe the IRS money, they will continue to take any refunds you have due and apply them to the tax debt. Only way around this issue is to modify your withholdings to make sure you are not due a refund in the future.

Since you failed to file a tax return, the IRS files one for you. You owe back taxes as a result. When the IRS files a return on your behalf, they file it in whatever way results in the maximum amount of taxes due. They don’t give you any deductions or credits, and chose the filing status which results in the highest amount of tax possible. This method almost always results in the IRS overestimating the amount of tax you owe (sometimes by quite a bit). If you received a CP51A, it is important to prepare and file accurate tax returns for the years in question so as to get your liability down to where it should be. If you don’t respond to this notice, the IRS will eventually start trying to collect the tax they say is due.

You have not filed your personal tax return for last year. The IRS sends this notice when it has reason to believe that you are required to file a tax return, but have failed to do so. They are attempting to get you to file a return. If you do not file the required return, they will file for you, and issue a CP51A next (see above).

The IRS believes you owe tax on one or more previous years. Therefore they are withholding your refund. The IRS sends this notice when you have failed to file a required return for a previous year, and claim a refund in a subsequent year. The IRS is holding your refund because they think you will owe tax for a prior un-filed year. If you get one of these notices, it is important to immediately file the tax return they are looking for.

This notice is a reminder from the IRS about the amount of tax you owe, including penalties and interest. These notices are simple reminder notices about your past due back tax debt. They are generally sent once a year, and should be the only notice you receive if you have been placed on Currently Not Collectible status with the IRS

The IRS has not received your tax return, but has credited payments and/or other credits to your tax account for the specific tax period.   File the tax return for the period and tax type listed in this notice.  If you think the payments may have been misapplied, call the IRS to get them straightened out.

The IRS has not received your tax return for the year ____. There is a statue of limitations to claim a refund or payment, which is about to expire. The IRS thinks you may be due a tax refund for a year that has an expiring statute of limitations on refunds. You only have 3 years from the original due date of a return to claim a refund, so you need to act fast in filing your return to secure the money the IRS owes you.

The IRS believes you owe tax on one or more previous years. Therefore they are withholding your refund. The IRS sends this notice when you have failed to file a required return for a previous year, and claim a refund in a subsequent year. The IRS is holding your refund because they think you will owe tax for a prior un-filed year. If you get one of these notices, it is important to immediately file the tax return they are looking for. This is essentially the same notice as CP63 (above).

The IRS has levied you for unpaid taxes. You may schedule a Collection Due Process Hearing. The IRS has taken actions to seize your assets to pay down your back tax debt. This action is usually taken as a last resort, because you have failed to work out an acceptable arrangement to deal with your tax debt. It is urgent that you act immediately to resolve your matter, and try to get the levy released.

This notice is a reminder from the IRS about the amount of tax you owe, including penalties and interest. This is a friendly reminder that you have a balance due. If you have the funds to pay the balance you should do so to avoid any further penalties and interest. If you do not have the funds, you should call the IRS to discuss options such as a payment plan or propose an Offer in Compromise.

This notice is a reminder from the IRS about the amount of tax you owe, including penalties and interest. Essentially the same as Notice CP160, this letter is a reminder of your unpaid taxes, and signals the start of the collection process. It is easiest to deal with your back taxes early on in the collections process, so it is important that you address the situation soon.

This notice is a reminder from the IRS about the amount of tax you owe, including penalties and interest. This is another variation of Notice CP 160. You should contact the IRS to work out a payment arrangement for your business taxes before the IRS takes drastic actions, like garnishing your wages, seizing your assets, or levying your bank accounts

This notice is a reminder from the IRS about the amount of tax you owe, including penalties and interest. This is a non-threatening reminder that your business has a balance due. If you have the funds to pay the balance, you should do so immediately. If you do not have the funds available, you should call the IRS to discuss a payment plan or propose an Offer in Compromise.

The IRS records show that you have not filed a business tax return for the specific year. This is a notice that you have not filed a tax return for your business. You should prepare and file the return immediately. If you have filed the return, you should contact the IRS and inform them that you have filed the return, as it may have been processed incorrectly.

The IRS has levied you for unpaid taxes. You may schedule a Collection Due Process Hearing. Because you have not made arrangements to deal with your unpaid back taxes, despite numerous contacts from the IRS, they have seized some of your assets. It is extremely urgent that you contact the IRS, either on your own or with the help of a Michigan tax attorney, to work out a resolution to your situation, and try to negotiate a release of the levy.

You owe money to the IRS. This is the IRS’s first reminder that you have a balance due. If you do not have the funds to pay the amount due, call the IRS to set up a payment plan or propose an Offer in Compromise. If you do have the funds to pay the amount due, pay the balance immediately to avoid incurring further penalties and interest.

The IRS is informing you again that you have a balance on one of your tax accounts. This is your second notice. If you have a balance due and should pay the amount stated if you have the funds to do so. If you cannot afford to pay the amount, contact the IRS as soon as possible to arrange a payment plan or propose an Offer in Compromise.

If you do not pay the amount due for your tax account, the IRS will levy certain property or rights to the property and put it towards the amount you owe. This is a notice that should not be ignored, you have a balance due and the IRS now has the intent to levy. If you don’t act to get your tax issues resolved, the IRS will levy your bank accounts, any federal tax refund owed to you, and even your state tax refund.

Another notice stating the IRS has no record of the prior tax return(s) being filed. This is your second notice that you have not filed your individual prior year tax return. You should immediately file the return if you have not already done so. If you believe you do not need to file the return r have a valid reason for filing late you should respond with that information on the form.

Another notice stating the IRS has no record of the prior tax return(s) being filed. You have not filed a tax return or the IRS does not have a record of your return. You should prepare and file your return immediately. If you have a valid reason for not filing a return, you should use the response form attached to explain why you are filing late, why you should not have to file, or that you have already filed your return.

Final notice stating the IRS has no record of the prior tax return(s) being filed. This notice should not be taken lightly, the IRS sends this notice when you have failed to file prior year tax returns and is issuing its final notice before it begins its collections processes. You should file the missing return(s) immediately or you may be subject to levies and garnishments as a result. An experienced professional may be able to help prevent or delay collections and can provide valuable insight into the process.

The IRS claims that you have defaulted on your agreement, and they intend to terminate your installment agreement and seize your assets. The IRS sends this notice when you have defaulted on your payment plan agreement. This notice is among the more serious notices the IRS will send and should be addressed immediately. The IRS may seize your assets to collect the balance due. You should contact a professional immediately to help protect yourself against the IRS and a seizure of your assets. A professional can help make arrangements to pay the balance due before your assets are seized through a payment plan or even an Offer in Compromise.

The amount of income on file with the IRS does not match what you have reported on your tax return, which could affect your tax return. The notice will tell you what information the IRS received that was different from the information you provided on your tax return. There will be instructions that you should follow if you do not agree with this change. If the information the IRS has received is incorrect, you should contact the person or business that provided the IRS with the information and as them to correct it. After correcting the information, you should forward the corrected information to the IRS.

This notice states the IRS has received information that wasn’t reported on your tax return. You must contact them immediately. You should contact the IRS immediately. They have received information that will likely affect your return and the amount of tax owed or refund issued. If you are unaware of what you should do or how to respond to the IRS, a professional such as a tax attorney can help resolve the discrepancy and place a hold on the collections process if money is to be owed as a result of this information.

The IRS has not received your tax return. Therefore, they have calculated your tax based on income reported by your employers, finances, etc. The IRS has filed a substitute return on your behalf, using the wage and income information they have received. This return does not consider any expenses or deductions you may have been entitled to and usually results in a larger tax bill than if you were to file the return yourself. You should immediately prepare and file the missing return, and work out payment arrangements if you owe back taxes.

The IRS has received different information than what is reported on your tax return. This could affect your tax. This notice explains how you can challenge it in the U.S. Tax Court. The IRS has received information that does not match the information provided on your return. Be sure to review the information listed in the notice, and check it for accuracy and against your tax return to see if it was reported

The IRS has made a formal determination of your tax due. You no longer have any right to appeal the result within the IRS, and have 90 days to file a tax court petition.You have not provided the IRS with the additional information they have requested, and they are now proposing to amend your filed return. You can agree with the changed by completing and signing Form 4089, Notice of Deficiency- Waiver. If you have the additional information the IRS is looking for, provide it to them immediately. If you do not agree with the proposed changes, you have 90 days to file a petition with the U.S. Tax Court.

The IRS has not received your tax return. Therefore, they have calculated your tax based on income reported by your employers, finances, etc. The IRS has filed a substitute return on your behalf using the wage and income information they have received. This return does not consider any expenses or deductions you may have been entitled to and usually results in a larger tax bill than if you were to file the return yourself. You should prepare and file the missing return immediately.

This is the final notice you will receive before the IRS intends to levy. The IRS is notifying you of their intent to issue a levy against your federal payments due to you, your salary and wages, retirement benefits, and may seize your automobiles, real estate and other property in order to collect the tax owed. You should contact the IRS immediately to discuss the entering into a payment plan or proposing an Offer in Compromise. It may be best to get a professional involved at this stage or prior to this stage, as they may be able to prevent or delay the seizure of your assets.

The IRS is requesting a payment, or is notified you of an unpaid balance. This is an early reminder that you have a balance due. The balance could include the amount of under paid tax, penalties, and interest. It should be paid immediately to avoid the possibility of a levy or seizure of your assets. If you cannot afford to pay the balance due, an experienced IRS tax attorney can help set up a payment plan or propose an Offer in Compromise on your behalf.

This is the first notice the IRS sends before levying, stating your right to a hearing. This letter is your final notice before the IRS attempts to levy your bank accounts, wages or other income. This needs to be addressed immediately to avoid these harsh consequences.  An experienced tax professional can help stop or delay the collection process and work out a payment arrangement or Offer in Compromise.

The IRS wants you to call them regarding your overdue taxes/tax return. You should contact the IRS or a tax professional immediately. The IRS is notifying you that because you have not responded to previous notices, they may begin the process of assessing a Federal Tax Lien and seize your assets or levy your wages or bank accounts in order to collect your tax debt. You should act immediately to protect your assets by contacting the Ayar Law Group and speaking with our experienced IRS tax attorney.

This is reminder of the balance due. You still have a balance due with the IRS and it will continue to accrue penalties and interest until it is paid in full. An experienced tax professional can help set up a payment plan or propose an Offer in Compromise with the IRS before the IRS begins its collections enforcement process that could result in the seizing of your assets and levies on your bank accounts and income.

The IRS is requiring that you change one of your employee’s withholding exemptions (usually to 0).The IRS believes that an employee of your has filed an incorrect W-4. This letter does not mean you have committed any error of your own, but the IRS wants you to correct the issue by withholding income tax for that employee by changing their withholding rate and withholding allowances. This usually happens when an individual claims exempt, or a high number of exemptions, on their W-4, then fails to pay the balance due when they file their tax return.

An Experienced Tax Professional

Please be advised that all tax audits should be handled by an experienced tax professional. Please refer to the guide below
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This post was last modified on February 26, 2021 8:04 AM

Gustavo Viera

Gustavo A Viera is the managing partner of Accountants in Miami. His experience spans more than 35 years. He started his career in public accounting at the Big 4 CPA Firm of PriceWaterHouseCoopers where reached the level of senior audit manager. His Fortune 500 experience includes positions as CFO - Latin America Region for both Hewlett Packard and Telefonica of Spain. Gustavo also writes a blog twice a week that addresses trending accounting and tax issues. He is an SBA Advisor and teaches workshops for aspiring entrepreneurs. His office is located at 8950 SW 74 Court Suite 2201 – Miami, FL 33156 and is admitted to practice in the State of Florida as a licensed Certified Public Accountant. Gus welcomes questions and he can be reached at 305-431-2601.

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