IRS Notice in the Mail: 5 Steps to Take Right Now

Got an IRS notice? Your next move determines whether this costs you hundreds or thousands.

That envelope sitting on your kitchen counter isn’t going away, and neither is the problem inside it. But before you panic or make costly mistakes, here’s exactly what to do immediately to protect yourself and your business.

Step 1: Don’t Panic (But Don’t Ignore It Either)

Take a Deep Breath: IRS notices feel scary, but most are fixable if you respond properly and on time.

Don’t Hide From It: The biggest mistake people make is shoving the notice in a drawer and hoping it disappears. It won’t. Every day you wait makes your options more limited and more expensive.

Open It Immediately: You can’t solve a problem you don’t understand. Read the notice completely, even if it’s confusing or overwhelming at first.

Step 2: What Happens If You Ignore It

The Timeline Gets Shorter: Most notices give you 30 days to respond. Miss that deadline, and your options become much more limited and expensive.

Simple Problems Become Complex: A notice asking for $500 in additional tax can turn into a $2,000 problem with penalties and interest if you ignore it.

Collection Actions Start: Ignoring notices leads to liens that destroy your credit, bank levies that empty your accounts, and wage garnishments that take up to 70% of your paycheck.

Your Rights Disappear: Many notices give you appeal rights and options to contest the IRS’s position. Ignore the deadline, and you lose those rights permanently.

Example: A client received an income discrepancy notice claiming they owed $3,200 in additional taxes. They ignored it for six months. By the time they called us, penalties and interest had grown the debt to $4,800, and they’d lost their right to dispute the original assessment.

Step 3: Read and Verify the Information

Check the Basics: Make sure the notice has your correct name, address, Social Security number, and tax year. Mistakes happen, and sometimes notices are sent to the wrong person.

Understand What They’re Claiming: Is the IRS saying you didn’t file a return? Do you owe additional tax? Do they need more information? The notice will clearly state what they believe the problem is.

Verify Against Your Records: Pull out your tax return for the year in question and any supporting documents (W-2s, 1099s, receipts). Compare what the IRS is saying to what you actually filed.

Look for Obvious Errors: Sometimes the IRS has incorrect information – wrong income amounts, missing deductions you claimed, or credits they didn’t apply properly.

Step 4: Understand Your Next Steps

The Notice Tells You What to Do: Most IRS notices include specific instructions – pay a balance, send missing documentation, file a missing return, or call a specific phone number.

Simple Responses: Some notices just need a payment or a signed form sent back. If you agree with what the IRS is saying and can afford to pay, the solution might be straightforward.

More Complex Issues: Other notices require detailed explanations, additional documentation, or formal appeals. These include income discrepancies, business tax issues, or notices threatening collection actions.

Know Your Deadlines: The notice will clearly state when your response is due. Mark this date on your calendar immediately. Missing deadlines eliminates most of your options.

Step 5: When to Call Professional Help

Get Help Immediately If:

• The notice involves payroll taxes (these create personal liability even for LLC/corporation owners)
• You’re facing immediate collection actions (levies, garnishments, asset seizure)
• The amount is substantial (generally over $5,000)
• You disagree with what the IRS is claiming
• You haven’t filed returns for multiple years
• The notice is confusing or you don’t understand what’s being asked

You Might Handle It Yourself If:

• The notice is asking for a small payment you can afford
• You agree with the IRS’s assessment
• It’s requesting simple documentation that you have readily available
• The instructions are clear and straightforward

Red Flags That Always Need Professional Help:

• Notice of Intent to Levy
• Final Notice of Intent to Levy
• Notice of Federal Tax Lien Filing
• Trust Fund Recovery Penalty assessments
• Audit notices and examination letters

Why Professional Help Often Saves Money: Tax professionals know how to respond strategically, can often get penalties removed, negotiate better payment terms, and protect your rights throughout the process. The cost of professional help is usually less than the cost of handling it wrong.

Common Notice Types and What They Mean

Balance Due Notices: Start with simple payment requests and escalate to urgent collection threats if ignored. These get more aggressive with each mailing.

Income Discrepancy Notices: The IRS thinks your income was higher than what you reported based on forms they received from employers or clients. Requires detailed documentation to dispute.

Statutory Notice of Deficiency: Official notice that you have 90 days to petition Tax Court or the IRS assessment becomes final and can’t be disputed.

Final Notice of Intent to Levy: Your last warning before the IRS starts seizing bank accounts, wages, and assets. This is not a drill.

Real Examples: Right and Wrong Responses

The Right Way

The Situation: A Small business owner received an income discrepancy notice claiming $8,000 in unreported income from a 1099 that was issued in error.

The Response: Called within one week, gathered documentation showing the 1099 was wrong, and submitted a detailed written response with proof.

The Outcome: IRS accepted the explanation, no additional tax owed, case closed in 60 days.

The Wrong Way

The Situation: The Construction contractor received the same type of notice for $12,000.

The Response: Ignored it for four months, hoping it would go away.

The Outcome: Assessment became final, penalties and interest added $4,000 to the debt, IRS filed a lien that prevented him from getting bonding for government contracts.

Your Next Steps

IRS notices have deadlines for a reason. The sooner you respond appropriately, the more options you have and the less it will cost you.

Facing an IRS notice you don’t understand? Visit https://downiesolutions.com or email hello@downiesolutions.com to schedule an immediate consultation. As an Enrolled Agent practice, we specialize in IRS notice response and can often resolve issues quickly and cost-effectively.

Need help right now? Don’t wait until the deadline approaches. The earlier we can review your notice and situation, the better outcome we can usually achieve.

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Downie Solutions helps business owners and individuals respond to IRS notices and resolve tax problems before they become crises. As an Enrolled Agent practice based in Brooklyn, NY, we represent clients nationwide before the IRS.