An envelope from the IRS triggers an instinctive jolt, and then a choice between two bad reactions: panic, or pretend it did not arrive. Neither helps. Most letters are routine, almost all of them have a deadline, and the response is usually more manageable than the worry that precedes it.
First, read what it actually says
Every IRS notice has a code in the corner (a “CP” or “LTR” number) and, somewhere in the body, two things that matter most: what is being asked and by when. Before anything else, find those. A surprising share of escalations happen not because the underlying issue was serious, but because a deadline quietly passed.
A CP2000 is not an audit
The most common scary-looking letter is the CP2000. It is not an audit. It is an automated notice generated when the income reported on your return does not match the information returns (W-2s, 1099s, K-1s) that third parties sent the IRS. It proposes a change and gives you a chance to agree or disagree.
If the IRS is right, you agree and arrange payment. If it is wrong — a double-counted form, a basis the IRS did not know about, income that was actually reported elsewhere — you respond with documentation explaining why. Either way, you respond by the date on the notice.
The types of audit
If it is an actual examination, it will generally be one of three kinds:
- Correspondence audit — conducted entirely by mail, focused on one or two items. By far the most common.
- Office audit — you (or your representative) bring records to an IRS office.
- Field audit — an examiner reviews records at your business; usually reserved for more complex situations.
In every case the principle is the same: respond on time, provide what is asked, and resist the urge to volunteer more than the question requires.
What a CPA can do for you
A licensed CPA is a Circular 230 practitioner, which means we can represent you before the IRS as your power of attorney — you sign a Form 2848, and from that point the agency deals with us. We read the notice, work out what is really being asked, handle the correspondence and meetings, and, where the facts support it, pursue appeals or penalty relief on your behalf. You do not have to be in the room, and you do not have to face it alone.
What no honest practitioner will do is promise an outcome. What we can do is make sure your position is well supported, your deadlines are met, and the agency hears the strongest accurate version of your facts.
Penalties and getting current
If penalties are on the table, there are real avenues — first-time abatement and reasonable-cause relief among them — and if you have fallen behind on filings, getting current deliberately is almost always better than waiting to be found. For clients whose lives cross borders, foreign-reporting penalty letters (the FBAR and FATCA kind) are a frequent and often fixable version of this same problem.
The takeaway
Do not ignore the letter, and do not panic over it. Read it, note the deadline, and decide whether it is something to answer yourself or hand to someone who does this routinely. If you would rather not face the agency alone, bring it to us — book a free consultation and we will tell you, plainly, what you are looking at.
