Before the pandemic, almost half of Americans (48%) viewed the IRS negatively. Once the pandemic hit, though, most Americans were provided with financial relief and the IRS helped them get it, so perceptions about the IRS improved sharply. As a result, a letter from the IRS was no longer seen as something to fear—it might be an indication that a check was on the way!
Not all IRS letters to taxpayers are positive, though. Some could indicate that you owe a hefty sum of money to the IRS, and some could even mean that you’re about to suffer penalties or consequences for avoiding your returns or tax debt.
The first step in preventing a bad situation from unfolding is to understand your letter from the IRS. You can learn everything you need to know about the different types of IRS letters and how to deal with them right here.
Identifying a Letter from the IRS
If you regularly receive mail, phone calls, or emails, then you already know how prevalent scams are. In fact, there’s a huge chance that you’ve been already targeted at one point or another.
Fraudsters are always looking for new ways to trick people into handing over their hard-earned cash, and one of the most common types of scams involves tricking Americans into thinking they owe a tax debt to the IRS. For that reason, it makes sense to be suspicious if you receive a letter from the IRS in the mail.
The first thing you should do if you get a letter that appears to be from the IRS is to verify its legitimacy. This can be difficult to do because a fake IRS letter will likely look and appear real. Here are some tell-tale signs that could indicate the letter isn’t legitimate:
- There are misspelled words or clear grammatical issues.
- The letter asks you to provide bank account details to the IRS.
- The letter demands one form of payment.
- The letter is asking for payment in the form of gift cards or something else that doesn’t add up.
- The letter is threatening you and saying you need to act immediately.
- The letter contains contact information that’s different from the official IRS contact information.
- The letter contains mistakes like an incorrect last name.
- The letter doesn’t give you clear instructions on how to proceed.
- The letter claims that you’ve won gift money or some type of contest.
Real IRS letters will always have a notice number or a letter-number on the top or bottom right-hand corner. If there is not a number on one of those areas, then the letter is likely a fake.
If you’re unsure whether a letter is legitimate or not, then it’s advised that you immediately reach out to the IRS at 800-829-1040. If you don’t feel comfortable doing that, then you could also bring the letter to tax attorneys who can help you determine if it’s real.
Different Types of IRS Letters and How to Deal With Them
Once you’ve accepted that the IRS mail is legitimate, you need to identify what type of letter it is and determine how to proceed. Remember, a real IRS letter will always include clear, actionable steps that you need to take. If a response isn’t required, then the letter should clearly state that no reply or action is needed.
Below, we’ll go over the different types of IRS letters and how to deal with them.
CP521: You Have an Installment Payment Due
One of the most common IRS letters you might receive is a CP521 letter. This letter indicates that you have an installment payment due. Think of this letter as a gentle reminder to send in your monthly payment by the due date.
In response to this letter, you should pay the amount due by the date indicated on the letter. You can mail in your payment with the provided envelope. If you don’t pay, then you could end up defaulting on your agreement.
CP180 or CP181: Your Return Can’t Be Processed; Missing a Form
Another common reason the IRS may send you a letter is because there was an issue with your most recent tax return. A CP180 or CP181 letter means you’re missing either a schedule or form.
In response to this letter, be sure to read and understand what form or schedule you need to provide to the IRS. Then, download the required form and fill it out. If you have further questions or concerns about the issue, then consider reaching out to either an attorney or the IRS directly.
CP504: You Owe a Debt to the IRS; Final Notice
One of the most common tax problems is getting a tax bill that you can’t pay. If you owe a debt to the IRS, you’d better believe that they’ll remind you to make a payment. The first notice will come in the form of letter CP501. The second request is CP503. If you still haven’t paid in full, then the IRS will send out a CP504 letter.
This is a final notice to settle your tax debt. If you don’t act, then the IRS will move on to more serious consequences, including levying your assets. If you receive this notice, then you need to reach out to either a tax attorney or the IRS as soon as possible, as inaction could result in significant consequences.
CP44: Notification of Delay
Tax FAQ pages are filled with people wondering where their tax refund is. Is this you? If the IRS is experiencing delays when processing your returns, then they’ll send you a CP44 letter. This letter means the IRS is still in the process of determining your tax status. You’ll need to wait for more correspondence letters to determine what to do next.
Economic Impact Payment Notices
Recently, the IRS has taken control over distributing stimulus checks to millions of Americans. After you received your funds, you should have received an IRS letter detailing how much you received. This letter does not require further action, but it’s recommended that you save it. When you go to file taxes, you’ll need to verify how much you received. You can reference this letter to ensure you fill out those questions accurately.
If you did not receive the stimulus funds that the letter indicates you did, then you need to reach out to the IRS about the problem. Not only do you need to clear up the misinformation, but you could end up receiving your rightful stimulus money, too!
CP523: Intent to Terminate Your Installment Agreement and Seize Assets
A CP523 letter is a serious ordeal. This letter means that you’ve failed to keep up with your installment agreement with the IRS. It also means that the IRS is preparing to take drastic action to collect from you. Without any response from you, the IRS will move forward with plans to seize your assets.
After receiving this, it’s crucial to take action. Make a payment on your account if it’s possible. You should also reach out to an attorney ASAP, even if you are able to make a payment. Depending on your situation, you may be able to stop collection efforts. You might also be eligible to file an appeal. Even better, you might still be in a good enough standing to negotiate a new installment agreement or reinstate your old one.
How To Report a Fake IRS Letter
So, what should you do if you got an “IRS” letter in the mail only to find out that it was a scam? First, do not attempt to communicate with the scammer or give them any further details about your address, name, or accounts. Next, consider reporting the scam to the Treasury Inspector General for Tax Administration. You can contact the IRS directly at firstname.lastname@example.org.
You Don’t Have to Face a Letter from the IRS Alone
Have you recently received a letter from the IRS? If so, don’t panic! Follow this guide to ensure that you remain compliant with the law:
- Identify the letter and verify its legitimacy.
- Determine what type of letter it is and whether action is required on your part.
- Learn what to do to ensure you remain compliant and in good standing with the IRS.
These steps seem easy on paper, but IRS mail can be difficult to cope with. Getting correspondence from the government can feel intimidating, confusing, and ambiguous. The good news is that you don’t have to face the situation on your own!
Here at Tax Group Center, our tax consultants, tax attorneys, CPAs, and enrolled agents can all help you deal with the IRS. Whether you owe the IRS a significant chunk of money or you just don’t understand a letter they’ve sent to you, we can help. Contact us today with any of your tax questions, concerns, or needs. We’re happy to help, and we look forward to hearing from you!