The IRS Sent You a Letter — Now What?

Kim Bernstein
14 minutes ago
3 min read

Getting mail from the IRS can feel like a punch to the gut. That official-looking envelope shows up, and suddenly your heart drops, your palms sweat, and your brain starts racing.

Did I mess up? Am I in trouble? What do they want?

Take a breath. Not all IRS letters mean doom and gloom. In fact, most are routine, fixable, and manageable, especially if you know how to respond.

Here’s what you need to know when the IRS comes knocking by mail.

First: Don’t panic. But don’t ignore it either.

Some IRS letters are purely informational. Others require action. Either way, the worst thing you can do is toss it in a drawer and hope it disappears.

📬 Tip: Open the letter, read it thoroughly, and keep a copy in your records.

Step 1: Identify the letter type

The IRS gives each letter a code in the top or bottom corner, such as CP2000, Letter 12C, or LT11. This code tells you what the letter is about and what they need from you.

Common IRS letters and what they mean:

CP2000 — The IRS found a mismatch between your return and what was reported to them. This often means a missing 1099 or W-2. It’s a proposed change, not a bill yet.
Letter 12C — The IRS needs additional information to process your return, such as a missing form, documentation, or signature.
CP504 — This is a final notice that a balance is due before collections may begin.
LT11 or Letter 1058 — This is serious. It means your balance remains unpaid, and the IRS may issue a levy. You should not delay responding.

For additional information see our blog on What That IRS Letter Really Means: A Guide to Understanding IRS Notices & Letters

Step 2: Read the letter line by line

Look for key details such as:

The issue the IRS is addressing
What the IRS says you owe, if anything
What they believe is missing or incorrect
What documents or responses they are requesting
The deadline to respond

Highlight any dates and action items so you can plan your next steps clearly.

Step 3: Gather documentation

If the IRS is questioning something, this is your opportunity to show your work. Keep it organized, and only send what is requested.

Example:

Let’s say you receive a CP2000 because the IRS says you didn’t report a 1099-NEC. But you know you did, it was just reported under a different business name. You would respond with:

A written explanation
A copy of the original 1099
A copy of your filed tax return
Any related Schedule C or other supporting documents

The more clearly you can explain and support your case, the smoother the process.

Step 4: Respond by the deadline

This step is critical. Even if you disagree with the letter, you still need to respond on time.

You can typically reply by mail, or your tax professional can do it for you. Some letters may include fax or online submission options as well.

If you agree with the IRS and owe a balance, follow their instructions to pay or request a payment plan.

If you disagree, send your response and documentation. The IRS may review it and reply with either confirmation or further instructions.

Step 5: Get professional help if needed

If you’re confused, overwhelmed, or just want someone to double-check things, that’s completely normal. A tax professional can:

Review the notice for accuracy
Help you prepare a correct response
Communicate with the IRS on your behalf
Prevent accidental mistakes that can make things worse

This is especially helpful with larger balances, audit requests, or missing paperwork.

Real example: Jasmine’s CP2000 letter

Jasmine runs a small side business along with her full-time job. She received a CP2000 showing unreported income from a 1099-NEC she had forgotten to include.

She reached out to us. We pulled her tax return, confirmed the 1099 was missing, calculated the tax due, and prepared a response along with a request for a payment plan. The result? No penalties. No stress. Just handled.

What if you can’t pay?

You still need to respond. The IRS offers several options:

Payment plans
Temporary hardship status
Offer in compromise, if you qualify

Ignoring the letter won’t make it go away. Communicating gives you options. Communication is better than silence.

Bottom line: IRS letters are manageable

They may feel intimidating, but they’re not impossible to handle. And they don’t mean you’ve failed.

In many cases, all the IRS needs is clarification, a missing document, or a simple correction. Staying calm, organized, and proactive can make all the difference.

Received a letter you don’t understand? Let’s go over it together. I’ll help you figure out your next step, with no judgment and no panic.