What That IRS Letter Really Means: A Guide to Understanding IRS Notices & Letters

Kim Bernstein
2 days ago
3 min read

Getting a letter from the IRS can be nerve-wracking, but not all IRS mail means you're in trouble. In fact, many notices are routine and fixable. The key is understanding what the letter means, why you received it, and how to respond.

Here's a breakdown of the most common IRS letters, what they mean, and what you should do if one lands in your mailbox.

1. CP2000 – Proposed Changes to Your Tax Return

What it means: The IRS identified a mismatch between the income reported on your tax return and the information provided by third parties (such as W-2s or 1099s). This notice is not a bill but a proposed adjustment to your return.

What to do:

Review the notice carefully.
If you agree, follow the instructions to sign and return the response form and pay any resulting balance.
If you disagree, provide documentation to support your position within the timeframe specified.

Note: If you delay in responding or the IRS deems your position negligent, a 20% accuracy-related penalty could apply.

2. Letter 12C – Request for Missing Information

What it means: Your return is missing critical information, often related to the Premium Tax Credit (e.g., Form 8962 or Form 1095-A). The IRS needs this information to process your return.

What to do:

Respond promptly, usually within 20 days.
Submit the missing documents by mail or fax as instructed.

Example: Luis forgot to include Form 8962. He submitted it within 20 days, and the IRS processed his refund without issue.

3. CP504 – Final Notice Before Levy

What it means: This is a final reminder of unpaid taxes. It warns that the IRS may levy (seize) certain assets, including your state tax refund.

What to do:

Do not ignore it.
Pay the balance in full, set up a payment plan, or request a resolution option like Currently Not Collectible status.

4. LT11 / Letter 1058 – Final Notice of Intent to Levy

What it means: The IRS intends to seize assets such as wages or bank funds. You are entitled to a Collection Due Process (CDP) hearing within 30 days of the notice date.

What to do:

Contact the IRS or a tax professional immediately.
Consider requesting a CDP hearing by filing Form 12153.

5. CP90 – Final Notice of Intent to Levy (Social Security)

What it means: A specific notice of levy targeting Social Security benefits due to unresolved tax debt.

What to do:

Act within 30 days to appeal or negotiate a payment solution.
You can request a CDP hearing just like with LT11.

6. CP14 – First Notice of Balance Due

What it means: This is the IRS's first formal notice that you owe taxes. Interest and penalties begin accruing.

What to do:

Pay the amount due within 21 days (10 days if you owe more than $100,000).
Or set up a payment plan online at IRS.gov.

Tips for Responding to IRS Letters

✅ Don't panic. Many letters are routine.
✅ Read carefully. Look for the notice or letter number in the top right corner.
✅ Act quickly. Most notices have response deadlines.
✅ Keep records. Save copies of everything you send and receive.
✅ Get help. A tax professional can guide you and reduce stress.

Final Thoughts

IRS letters might look intimidating, but most are routine and manageable, especially when you know what they mean. If you're unsure how to respond, it’s always smart to get professional help.

At KB2 Bookkeeping & Tax, we help small business owners and individuals take the mystery out of tax letters. Whether it’s a simple form fix or a more serious notice, we’ve got your back.

📌 Got a letter you’re unsure about and is not included in the above? Reach out to us to include your IRS letter and explanation! Let’s review it together. Contact us today for support, peace of mind, and solutions that work.