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Understanding An IRS Notice

The IRS notice can send shivers down the back of the strongest individuals. In fact they just seem complicated and intimidating. Take a deep breath and resolve to solve the problem by understanding what the notice is about. Always make the effort to read the notice carefully. In fact it is better to read it once set it aside and read it through when you are calm, have had a good meal, and the family is settled for the day.

Very often all they are asking is for a few clarifications or indicating that you have overpaid in taxes. The easiest step to take is to ring the IRS at the telephone number given in the letter and request for elaborations/clarifications.

More often than not all you need to do is just follow the instructions given in the letter and send the reply with copies of documents they need under registered post or certified post. If this does not resolve the matter, seek the help of a CPA or tax lawyer who has experience in such matters.

Every letter from the IRS has a code: CP followed by a number. If you look up the I RS website they provide a list of codes and what each code means, see: http://www.irs.gov/individuals/article/0,,id=125104,00.html . The website is constantly updated. If the information you seek is not available use the IRS toll free number to resolve your queries. Or contact the IRS local office: http://www.irs.gov/localcontacts/index.html.

The IRS has created elaborate codes for individual filers pertaining to forms 1040, 1040A, 1040EZ. Examples are:

  • CP2000 is a notice that informs the tax payer that the IRS is suggesting changes in the tax return based on information collected by the IRS from employers, banks, and others.

  • CP 501 is a notice that informs that tax payer that taxes are still due and that a Federal tax lien will be filed if the payment in not done in 10 days.

  • CP54Q indicates that the tax payer has a refund due which is withheld because the identification and name provided on the tax returns differ from information provided by The social security administration.

  • CP13 indicates the tax payer that changes made to their tax return during processing resulted in over payment or balance due.

  • CP09 indicates that the tax payer is eligible for an earned income credit.

  • CP12 indicates that the tax payer has made more than the necessary taxes and will get a refund within six weeks if no other taxes are owed.

  • Similarly the IRS has created codes for business tax filers. These pertain to forms 1040,1040A, 1040EZ and so on. Examples of their codes are:

  • CP101 Math error balance due on form 940, indicating that taxes are due.

  • CP112 indicates overpayment due to changes made in forms 941, 941 SS, or 943.

  • CP160 indicates that taxes are still to be paid.

  • CP165 indicates that the IRS is charging penalties as the federal tax deposit check was dishonored.


  • When a person receives an IRS notice all he or she needs to do is action on the notice based on the code indicated. This means you need to only address the matter pointed out and not run helter skelter trying to unravel the whole return. Be specific and quick and solve the problem systematically.

    About Author:

    Barry Allen is a freelance writer for Online Tax Firm, the premier website to find tax, return tax, tax software, free tax filing, sales tax, services tax,income tax, property tax and many more.

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