An envelope from the IRS is designed to make your stomach drop, and the majority of them are routine. The number printed in the top right corner tells you which process you are in, and that determines everything about the correct response.
Read the notice number first
Letters beginning CP are computer-generated notices. Letters beginning LTR are usually correspondence from a person or a unit. Common ones:
| Notice | What it means |
|---|---|
| CP2000 | Amounts reported by third parties do not match your return. This is not an audit. |
| CP14 | You have a balance due. The first bill in the collection sequence. |
| CP501, CP503, CP504 | Escalating reminders of that balance. CP504 warns of a levy. |
| CP05 | Your refund is being reviewed. No action is usually required yet. |
| Letter 5071C | Identity verification is needed before a return is processed. |
| Letter 566 or 2205 | An examination is opening. This one actually is an audit. |
| Letter 3172 | A notice of federal tax lien has been filed, with appeal rights. |
| Letter 1058 or LT11 | Final notice of intent to levy, with a 30-day right to a hearing. |
The IRS maintains a searchable index of every notice at Understanding your IRS notice or letter. Type the number in and read the official explanation before you do anything else.
The CP2000 is the one you will probably get
Automated underreporter notices compare the income documents filed under your Social Security number with what appeared on your return. A missing 1099, a brokerage sale reported without basis, or a form that arrived after you filed will all produce one.
You have 30 days to respond, and you can agree, partially agree or disagree with an explanation and documents. Do not file an amended return in response to a CP2000 unless the notice tells you to: it duplicates the work and confuses the file.
What an audit actually looks like
The IRS conducts three kinds of examination. Correspondence audits happen entirely by post and account for the large majority: the letter asks for substantiation of one or two items, such as charitable contributions or a dependent. Office audits ask you to bring records to an IRS office. Field audits, where an examiner visits a home or business, are reserved for complex or business returns and are comparatively rare.
Overall audit rates are low and have fallen substantially over the last decade, a trend documented at length by the Government Accountability Office in its reports on IRS enforcement. Rates are higher at the extremes: very high incomes, and returns claiming certain refundable credits.
How to respond well
- Do not ignore it. Deadlines in these letters are real, and rights expire on them.
- Answer only what is asked. Sending three years of bank statements when one receipt was requested invites a wider examination.
- Send copies, never originals. Keep the originals and a complete copy of what you sent.
- Use certified mail or the online upload tool, so you can prove the date.
- Keep a log of every call: date, time, the employee's identification number and what was said.
- Be polite and brief. The examiner is working a queue, and a clean, organised response is the fastest route out.
You have specific rights
The Taxpayer Bill of Rights is not decorative. It includes the right to be informed, the right to challenge the IRS's position and be heard, the right to appeal a decision in an independent forum, and the right to retain representation. If an examiner's position is wrong, the Independent Office of Appeals exists precisely to review it, and appeals resolve a large share of disputes without litigation.
When to bring in representation
A correspondence audit about one clearly documented item is usually something you can handle yourself. Get help when the audit covers a business or a Schedule C, when several years are open, when the amount at stake is large, when you cannot substantiate something, or when the words used start to sound like fraud rather than error.
Only a CPA, an enrolled agent or an attorney can represent you without limits, via Form 2848. Find one in the state directory, and read the credentials guide if you are not sure which you need.
The scam version
The IRS initiates contact by post. It does not open with a phone call demanding immediate payment, it does not text, it does not email a link, and it never asks for payment in gift cards or cryptocurrency. If a caller threatens arrest, it is a scam, full stop. Real notices can be verified by calling the number on the IRS website rather than the number in the message. See our guide to tax scams and ghost preparers.