Decoding IRS Notices & Letters
IRS notices use letter codes that mean different things. CP504 is a notice of intent to levy. CP523 is a default of an installment agreement. CP2000 proposes adjustments based on third-party information. Each notice has a response deadline and consequences for missing it. Valley Tax Law decodes the notice and handles the response.
The single most common cause of IRS collection escalation is failure to respond to a notice within the deadline. The IRS issues notices in a sequence, and skipping the response on any one of them advances the case to the next, more aggressive, step.
The Most Common IRS Notices
CP14: First notice of unpaid balance after a return is filed. Includes the balance due and a payment deadline. Not yet collection enforcement, but starts the clock.
CP501, CP503, CP504: escalating reminders of unpaid balance. CP504 is the notice of intent to levy state tax refunds and warns of broader levy authority.
LT11 / Letter 1058: Final Notice of Intent to Levy and Notice of Your Right to a Hearing. Triggers the 30-day CDP hearing window and is the last chance to stop a levy before it issues.
CP2000: proposes additional tax based on information returns the IRS received but does not match the taxpayer's return. Not an audit but functions like one if uncontested.
Letter 525 / 30-Day Letter: examination report from an audit. Offers the chance to agree, disagree informally, or protest to Appeals before the Statutory Notice of Deficiency is issued.
Letter 3219 / Notice of Deficiency: the 90-day letter. Last administrative step before assessment. Tax Court petition deadline runs from this notice.
CP523: notice of intent to terminate an installment agreement. 30 days to cure or the agreement defaults.
Response Deadlines That Cannot Be Missed
30 days from a Final Notice of Intent to Levy to request a Collection Due Process hearing. Filing within 30 days suspends levy authority and the collection statute.
90 days from a Notice of Deficiency to petition Tax Court (150 if mailed to a foreign address). After the deadline, the assessment is final and tax must be paid before any refund litigation.
30 days from an audit report (Letter 525) to file an administrative appeal. After 30 days, the next stop is the 90-day letter.
60 days from a CP2000 to respond if disagreeing. Failure to respond means assessment of the proposed adjustments.
How to Respond
Verify the notice is legitimate. IRS notices come by mail, not email or text. Scam notices have proliferated and often demand payment by gift card or wire transfer, neither of which the real IRS uses.
Read the notice fully. The notice will identify the tax year, the specific issue, the proposed action, and the response options. Many notices include a phone number for the assigned office.
Determine the deadline and the right response channel. CDP requests use Form 12153. Tax Court petitions go to the court directly. Audit responses go to the examiner. Wrong channel often means missed deadline.
Bring counsel for anything beyond a CP2000 with clear-cut documentation. The cost of representation is almost always less than the cost of a mishandled notice.
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