Explanation of IRS Notices CP 2000 thru Letter 1737

CP 2000: Notice of Proposed Adjustment for Underpayment or Overpayment

Why You Received this Notice

IRS Notice CP 2000 is sent out if the IRS has proposed changes to your income tax return. This is not a bill, but rather a notification that the IRS came up with a different amount for taxes due than you did.  This can work out in your favor, because sometimes they calculate that you owe less than you thought.  The IRS's proposal is based on a comparison of the income, payments, credits, and deductions reported on your tax return with information on these items reported to the IRS by employers, banks, businesses, and other payers.  

In addition to differences along these lines, the IRS sometimes finds errors in your original tax return.  If your tax return had any of these, the CP 2000 will display them.  The IRS has NOT actually made any changes; rather, this is just a notification and a summary of their proposed changes.  If they made any changes, they would have sent you a notice at that time.

How to Resolve this Tax Issue

The first thing you should do after receiving this notification is to verify the income, credits, and deductions reported on your tax return.  You will want to check if your records match what you originally had in your tax return or if you indeed did make a mistake and the IRS's proposal is in fact correct.  Remember, the CP 2000 is only a proposal that offers you an opportunity to disagree, partially agree, or agree with the proposed changes.  Next are some basic steps you should do to start this investigation.

If the Income was Included But Just Missed by the IRS

This is the best case scenario.  IRS employees search the tax return and try to locate all income. Sometimes, however, several income items are combined on your tax return and the employees can't determine the source.   You may find out after your initial investigation that this is what happened.  Your response may be as simple as directing your tax professional or the IRS to a line on your original return where you included the income with another income source.

If Issue is Complicated or You Disagree with Part or All of the Proposed Changes

It may be necessary to write out a case if the issue is more complicated and you disagree with some or all of the proposed changes. In that case, write a complete explanation of the reasons you disagree, or have your tax representative prepare such a report. Also, attach copies of any relevant documents. These may include copies of Form 1099, Miscellaneous Income, Form W-2c, Corrected Wage and Tax Statement, letters received from payers explaining any changes or corrections, or any other items that support your position. If you have an unusual tax situation, attach a written statement explaining the reasons you're reporting specific income items in a certain manner or why you're not reporting the income at all.

If the Mistake was an Oversight on Your Part

Review the information in the column marked "Shown on Return" and compare it with the information shown in the column marked "Reported to IRS (or Proposed by IRS)." Did you receive the income? If you received the income, was it reported on your tax return? If it wasn't reported on your tax return, was it an oversight? If so, don't file an amended return to report the income. Just check box "A" on the CP 2000 response page and return it with your check or money order made payable to the United States Treasury.

How the Interest is Handled

The law requires the IRS to charge interest on any tax that isn't paid by the return due date (Internal Revenue Code Section 6601). The IRS Restructuring and Reform Act of 1998, however, requires the IRS to notify taxpayers of the proposed discrepancies within 18 months of the original filing date in order to charge normal interest. You may find it beneficial to check with your tax professional to ask the IRS to adjust the interest charge if they made initial contact after that time.

There are some specific instances where you may not have to pay interest on the back taxes you owe.  For example, the law allows the IRS to reduce or remove interest on tax increases attributable to errors or delays they made in the performance of ministerial acts (Tax Reform Act or 1986 - Ministerial Act provision). A ministerial act is a procedural, mechanical, or processing act that doesn't involve the exercise of judgment and occurs even though you did everything the IRS required you to do. If you believe you qualify for abatement of interest based on this provision, you and your tax professional should include your reasons in your response.

Another important tip is that the law doesn't permit the IRS to reduce or remove interest for reasonable cause. Reasonable cause only applies to penalties and refers to an acceptable explanation of circumstances that prevented you from paying the tax when it was due.

Help if You Can Not Pay Your Tax Debt in Full

If you agree with the tax increase but you can't pay the entire balance due, you may be able to make arrangements with the IRS to reduce the tax debt or set up a payment plan. If you didn't report the income for another reason, you'll need to explain this to the IRS.  In either situation, it may be in your best interest to get some tax help from a tax professional to help you understand your options and to assist you with preparing and negotiating with the IRS on your behalf.

Why this Notice Took So Long to Find You

Tax years generally end on Dec. 31, but the IRS doesn't receive information from employers, banks, businesses, and other payers until much later. Once they receive all the tax returns and payer information, the IRS's computer system compares the information you reported with the information the payers provided. This process is very complicated and takes a long time to complete. Just to give you an idea, you may be contacted as early as 12 months from the date you file your tax return.

You Must Get Tax Help Quickly to Resolve this Tax Problem

It's important that you respond to the CP 2000 by the due date shown on the notice. If you don't, the IRS will assume the proposed changes are correct and continue processing the proposal ultimately to an assessment. If you find you can't respond by the due date on the notice because you need more time to research your records, call the IRS at the number at the top of your notice. Generally, the IRS allows an extension 30 days beyond the response date shown on the notice. It's important to remember that additional interest and any applicable penalties will accrue on your account during the period of the extension if the tax increase is correct.

LETTER 0484C: Collection Information Statement Requested (Form 433F/433D); Inability to Pay/Transfer

Why you got this IRS Letter

This letter has to do with a previous action you took with the IRS regarding a collection negotiation for an outstanding tax debt you have.   This letter requests that you complete a financial statement so that the IRS can determine your ability to pay.  Once the IRS has this information, they can complete their evaluation on your tax situation and come to a decision on whether or not they will change you tax payment terms and conditions.

How to Resolve this Tax Problem

Complete the financial statement and provide all of the substantiation requested. This may be difficult to do, especially if you are not the person who filed your original tax return.  You may be better off getting help from a tax professional who can provide the IRS with what information they need in the proper form. The key here is speed:  the faster you can get the IRS the information they require, the quicker you can resolve your tax problem.

In any case, the requested information must be received by the IRS by the due date contained in the letter.  Failure to provide this information may result in enforced collection action which could result in a levy on your wages or bank account, or even a tax lien on your personal property.  If you find yourself in this situation, your best response is to seek tax representation immediately to begin the resolution process and possible to delay, reduce, or eliminate the IRS collection action.

If you not agree with this request for a financial statement, call your tax representative or the IRS immediately. There are options available to you and ways to challenge the IRS's determination.  If you have already taken corrective action and it has been more than 45 days, there may be a problem and you should take steps to actively engage the IRS or get the tax help you need.

LETTER 0549C: Balance Due on Account is Paid

LETTER 668D (LP 68): IRS has Released the Taxpayer's Levy

What these IRS Letters Mean

IRS Letter 0549C is a great letter to get.  It is simply a statement from the IRS telling you that you no longer own tax, penalty or interest on the type of tax and year listed in the letter.  Letter 668D is also good news: it is the IRS statement confirming that they have released the Notice of Levy previously sent to you regarding the taxpayer named in the letter. 

Your Tax Problem is Resolved

There is no action you need to take if you received either of these letters.  In the case of Letter 668D, you are no longer required to turn over any money, property, or rights to property belonging to the taxpayer named in the letter.  The levy release is effective immediately upon receipt by you. There is no need to contact the IRS regarding the release, but you may want to inform the concerned taxpayer that you received the release of levy.

LETTER 0681C: Proposal to Pay Accepted

Why You Got this IRS Letter

This letter is telling you that based on the information you provided, the IRS officially accepts your request to pay as confirmed in the letter.  Do not read more into this letter other than what is written.  For example, this does not constitute a formal Installment Agreement with the IRS.

How to Resolve Your Tax Problem

Pay as much as you can pay.  This is the best alternative since it is in your best interest to pay down your tax debt as quickly as possible, because the IRS charges you penalties and interest until the balance due is paid.  If you can't pay your tax debt in full immediately, pay when you can.

If you do not make the payment, enforced collection action may be taken to collect the amount you owe.  This can include a Federal tax lien, a tax levy, or garnishment of your wages.  You will want to avoid these actions if at all possible, but if you find yourself in this situation already or if you simply do not have the money to pay your tax debt, you may want to contact a tax professional immediately to get the tax help and guidance you need to fix your tax problem.

LETTER 0757C: Installment Privilege Terminated

Why You Got this IRS Letter

You received this letter because you failed to meet the terms of your established installment agreement with the IRS.  What caused this to happen is that you did not make the specified payment amount on the established due date, so the IRS has terminated your installment agreement.

What to do to Resolve this Tax Matter

As soon as possible, you should contact a tax professional or the IRS directly.  Only by actively reaching out for help will you be able to get the tax help you need to try to resolve your tax problem.  There is no simple form to fill out or short cut to make this situation disappear, since each taxpayer's particular circumstances and options are different.

In addition to seeking help and trying to comply with the IRS, you should also immediately pay your tax debt if you are able to.  If you are not able to pay all or even part of your tax debt, you may want to seek tax representation so that you can find out what options are available to you.

The Cost of Doing Nothing

We cannot over-emphasize the need to act quickly, because failure to act on your part will result in the IRS taking some sort of a collection action against you.    Since you failed to meet the terms of your installment agreement, the IRS could proceed to enforce collection action by filing a levy on your bank account or wages or file a lien on your personal property.  You will want to avoid this scenario if at all possible, so please call a tax professional or the IRS immediately to begin the process of getting square with the IRS.

Letter 1058 (LT 11): Final Notice prior to levy; Your Right to a Hearing

What this IRS Letter is Telling You

This notice is telling you that the IRS is planning collection actions against you because of the outstanding tax debt you still have on one of your tax accounts.  Specifically, the IRS intends to issue a levy against your bank accounts, wages or other assets. The letter is also telling you that the IRS will begin searching for other assets on which to issue a levy and that they may also file a Federal Tax Lien, if they haven't already.

How to Fix this Tax Problem

The quickest and easiest way to resolve your tax problem is to pay the amount due as shown on the notice. The IRS will push you in this direction if you call them, since it is in their best interest to collect past-due taxes as quickly as possible.  The IRS letter you received has directions for mailing in your payment in the envelope included with the letter.

If you can't pay the whole amount now or would like to see if there are alternative options available to you, call a tax professional for a free consultation.  These professionals can not only offer advice and perform all of the necessary paperwork and legal actions, but they can actually represent you before the IRS during tax audits, appeals, and other proceedings. 

Getting in touch with an expert is typically a good idea, as you may qualify for an installment agreement or an offer-in-compromise with the IRS.  Just remember that you should contact the IRS, a tax representative, or pay your balance due immediately, because enforcement action may be taken to collect that balance due 30 days after the date of your letter.

Why this Tax Problem is Urgent

If you don't pay or make arrangements to pay within 30 days of receiving your letter, the IRS may begin collection actions against you.  They have several options available that they may use to collect the money. One option is to issue a levy against your state tax refund, wages, or bank accounts. Another option is for the IRS to file a Notice of Federal Tax Lien. The lien gives the IRS a legal claim to your property as security or payment for your tax debt.  Take it from those who have gone through this:  you do not want to be a part of one of these proceedings.

If you do not agree with what's written in your notice, you have the right to an appeal.  Call a tax professional or the IRS directly to begin the appeal process, or to just learn more about what options are available to you.   If you have already paid or arranged for an installment agreement, you should still call the IRS or your tax representative to make sure your tax account reflects this.

LETTER 1615 (LT 18): Mail the IRS your Overdue Tax Returns

Why You Got this IRS Letter

You received this letter because the IRS does not have a record of receiving federal income tax returns from you for the years indicated.  This is a problem, since you must file a tax return each year, even if you owe no taxes.

How to Resolve this Tax Problem

The best thing to do is to file the returns as soon as possible.  You must do this quickly.  If you cannot get the necessary paperwork together within 10 days, you should contact a tax professional who can assist you will filing your previous year's tax returns. If you are a wage earner, a tax professional and sometimes even the IRS should be able to provide you with your income and withholding information if you do not have the necessary records to complete your returns.

At the very least, if you cannot file the old returns immediately, contact your tax representative or the IRS as soon as possible, but no later than 10 days after the date on the letter.  They may be able to put into place some filings to give you more time. 

What Happens if You Do Not File

Well, the IRS will probably file the return for you. If this occurs, the tax liability could be higher than a return completed and filed by you or a tax professional because the IRS must use Filing Status Single with one exemption. Usually, voluntarily filed returns reflect a lower net tax and/or a higher refund amount than a return prepared and filed on your behalf by the IRS.  A difference in priorities is a probable explanation.

LETTER 1731 (LP 64): Please Help the IRS Locate a Taxpayer

Why You Received this IRS Letter

The IRS is trying to find a taxpayer that you may know.  You received this letter because they are asking for your help in trying to locate this person.

What You Should Do

Provide the IRS with any information you have on the taxpayer's address, home and work telephone numbers, the name and address of known employer(s) or others who may know how to locate the taxpayer.  Basically the IRS is asking for your help, and any information that might help them locate the person in question would be greatly appreciated by the IRS.

The IRS asks that you respond at your earliest convenience by mail using the enclosed envelope or by phone by calling the number shown at the top of the letter. Responses are requested within 10 days of the date on the letter. You can have your name excluded from the list of persons the IRS has contacted, just inform the IRS if this is your preference when you write or call.

LETTER 1737 (LT 27): Please Complete and Site Form 433F, Collection Information Statement.

What this IRS Letter is Telling You

This letter tells you that the IRS has received your request for a payment plan and now they need you to complete financial information to determine whether you qualify for an installment agreement. 

How to Resolve this Tax Matter

This is an easy one: complete the Form 433F that was included with the letter.  This information may either be mailed in, or you can call the IRS or a tax professional and provide the same information to speed up the determination on your installment agreement request.

Keep in mind that you must file any tax returns that are due before an installment agreement will be considered. If your tax returns are completed, have them available when you call because you may be able to fax them in to meet the filing requirement.  Also, be sure to that you or your tax representative contact the IRS no later than seven days from the date of the letter.

Do not make the mistake of assuming your installment agreement is already in place and that you don't really have to provide the IRS with the requested information.  Collection action could still be taken, including the filing of a Notice of Federal Tax Lien or a garnishment of wages and/or bank accounts, to resolve the balance you owe.