Tax
A letter has arrived and it has a deadline on it. This page explains what the common notices actually mean, what the first week should look like, and who answers for the return once we are authorised to speak for you.
Overview
Most IRS contact is not an audit. It is an automated notice generated because a number on your return did not match a number the IRS already held. Some of those notices are right. A great many are not, and the ones that are wrong are wrong in the government’s favour, because the automated systems assume every reported item is income and none of it has basis or offsetting deductions.
What all of them share is a deadline. Rights in a tax dispute expire in a fixed order, and each one that lapses moves the matter somewhere more expensive and less favourable. That is the single reason a manageable notice becomes a serious problem: not the amount, and not the underlying facts, but the calendar.
We act as the representative on the file. That means the correspondence comes to us, the calls come to us, and the client stops guessing at what a form number means. It does not mean we can promise a result — nobody can, and a firm that does is telling you something about itself rather than about your case.
What’s Included
Form 2848 puts a representative on the file: we receive the notices, speak to the examiner, and sign agreements where you authorise us to. Form 8821 is the narrower option — it lets us pull and inspect your account, but not advocate. Which one you need depends on whether there is a dispute or only a question.
Correspondence audits arrive by post and ask for documents on one or two items. Office audits ask you to attend an IRS office. Field audits bring a revenue agent to the business and are the broadest. Each has a different scope and a different amount of exposure in what you volunteer.
The CP2000 is the most common letter the IRS sends and it is not a bill — it is a proposal based on third-party data. Securities sales reported without basis, a 1099 already included under a different line, a duplicate filing: all produce a CP2000 that is simply wrong and is answered with a reply, not a payment.
The Independent Office of Appeals is separate from the examiners and considers the hazards of litigation, which an examiner cannot. Getting there is a written protest or a small case request, filed inside the window on the letter. Most disputes that are going to resolve, resolve here.
Two routes, and they are not interchangeable. First-time abate is an administrative waiver available on a clean compliance history. Reasonable cause is a facts-and-circumstances argument that has to be documented and argued. We assess which applies before spending your money on the wrong one.
Liens, levies, and wage garnishment follow a defined sequence of notices, and each notice carries a right that expires. We work the account before enforcement rather than after, because the options available narrow sharply once a levy is in place.
Installment agreements, currently-not-collectible status, and offers in compromise are three different answers to three different financial situations. Which one fits is arithmetic on your actual assets and income, not a preference.
Unpaid payroll taxes are the most dangerous balance a business can carry, because the trust fund portion can be assessed personally against the people who decided which bills to pay. These cases need attention before the IRS conducts its responsible-person interviews.
The Mechanics
Form 2848 is a power of attorney. It names a representative who may practise before the IRS — a CPA, an enrolled agent, or an attorney — and lets that person receive notices, discuss the account, present argument, and sign specified agreements on your behalf. Form 8821 is a tax information authorization: it permits us to receive and inspect your information, and nothing else. When a client wants us to see the account before deciding whether to engage on a dispute, 8821 is often the right first step.
The CP2000 comes out of the automated underreporter programme, which matches the forms filed about you — W-2, 1099, K-1 — against what appeared on your return. A mismatch produces a proposed adjustment. It is a proposal, and the response window is printed on the notice.
The reason these are so often wrong is structural rather than careless. The matching system sees gross proceeds on a securities sale and no basis, so it proposes tax on the whole amount. It sees a 1099-NEC reported on a Schedule C under a different description and treats it as omitted. Paying a CP2000 because it looks official is one of the more expensive habits we see.
An examination that ends in disagreement produces a 30-day letter: an examination report with a window to request Appeals. Let that pass and the next document is a statutory notice of deficiency — the 90-day letter.
The notice of deficiency gives 90 days to petition the United States Tax Court, or 150 days if it is addressed to a person outside the United States. That period cannot be extended, and it is the only route to dispute the liability before paying it. After it expires the tax is assessed, and the remaining path runs through paying first and claiming a refund.
The 90-day window is jurisdictional. There is no good-cause extension and no discretion to grant one. It is the single hardest deadline in a civil tax dispute, and the most common one to be missed by a taxpayer who put the envelope aside.
The Independent Office of Appeals sits outside the examination function and is directed to resolve disputes without litigation. It can weigh the hazards of litigation — the probability the government would lose in court — which an examiner has no authority to consider. That is why a position that goes nowhere in an audit can settle in Appeals.
How you get there depends on the amount in dispute. A small case request is available where the proposed tax for the period is $25,000 or less; above that, a formal written protest is required, setting out the findings you disagree with, the facts, and the law relied on. The protest is the document that does the work. We write it as an argument, not as a complaint.
First-time abate is an administrative waiver rather than a statutory right. It is available where the prior three years carry no comparable penalty and current filings and payments are in order. It is worth checking first because it needs no narrative, only eligibility.
Reasonable cause is the harder argument: that you exercised ordinary business care and prudence and were nevertheless unable to comply. Serious illness, destruction of records, death in the immediate family, and reliance on incorrect written advice all appear in the case law. “I could not afford it” generally does not, for failure to pay. The abatement request stands or falls on what is documented.
A federal tax lien arises by operation of law once tax is assessed, demand is made, and it goes unpaid; the Notice of Federal Tax Lien is the public filing that alerts creditors. A levy is the actual seizure — of a bank account, a receivable, or wages. Wage levies are continuous: they attach to each pay period until released.
The notices run in order. A CP504 states an intent to levy and is not the final word. The LT11 or Letter 1058 is the Final Notice of Intent to Levy and Notice of Your Right to a Hearing, and it opens a 30-day window to request a Collection Due Process hearing on Form 12153. That hearing is where collection alternatives get considered by someone with authority to accept them, and requesting it generally suspends levy action while it is pending.
An installment agreement pays the balance over time. Interest and the failure-to-pay penalty continue to run, so it costs more than paying now — it is a cash-flow answer, not a discount.
Currently not collectible is a determination that collection would create economic hardship. It stops enforcement while it lasts. It does not cancel the debt, the balance keeps growing, and the status is reviewed as income changes.
An offer in compromise settles a liability for less than the full amount, and it is the procedure most misrepresented in advertising. The IRS computes reasonable collection potential — the realisable equity in your assets plus your future income over a defined period — and will not generally accept less than that figure. If the arithmetic shows you can pay in full over the remaining collection period, the offer is rejected however difficult the payments would be. Acceptance is uncommon relative to how often the procedure is marketed. We will tell you before you spend anything whether your numbers are in the range where an offer is realistic.
Where a business has withheld payroll taxes and not remitted them, the withheld portion — the trust fund — can be assessed personally, at 100%, against any person who was responsible for paying it and willfully did not. Officers, bookkeepers, and anyone who decided which creditors got paid can all be within reach. The IRS establishes this through interviews, and what is said in those interviews is difficult to walk back. This is the point at which representation stops being optional.
Collection of an assessed liability is generally limited to ten years from the date of assessment, subject to events that suspend the clock — a pending offer, a bankruptcy, a CDP request, time abroad. Knowing where a liability sits against that date changes which alternative makes sense, and it is one of the first things we establish from the transcript.
A Decision You Face
The week after the envelope opens decides most of what follows. Not because anything has to be resolved in it — almost nothing can be — but because the options available later are set by what happens now.
The notice number is in the top right corner. CP2000, CP504, LT11, Letter 1058, Letter 525, Letter 3219 — each is a different stage with a different right attached. The dollar figure is the least useful thing on the page in the first week, because on a proposed adjustment it is frequently wrong and on a collection notice it is going to change anyway.
The clock runs from the date printed on the notice, not the day it reached you, and post that sat unopened has already spent part of the window. Write the deadline down before doing anything else. If it is a notice of deficiency, that date is the one that cannot move.
Paying a CP2000 is an agreement. If the adjustment is wrong — and a large share are — you have just paid tax you did not owe and made it a refund claim rather than a dispute. Read what the notice says was omitted and check it against the return before any money moves.
Nothing sensible can be decided without the account transcript: what has been assessed, when, what penalties are running, whether other years are open, and where the collection period ends. Form 2848 or 8821 is what makes that possible, and it is the first document we prepare.
Telephone conversations with an examiner or a revenue officer are recorded in a case history you do not control. Volunteered detail about other years, other entities, or why something happened tends to widen scope. Respond in writing, answer what was asked, and let the representative handle the calls.
The rights in a tax dispute run in a sequence, and each one that lapses removes a cheaper option:
None of those doors reopen. That is the whole of it: the facts of a case rarely get worse, and the procedural position almost always does. A notice brought to us in its first week is a different piece of work from the same notice brought to us in its fifth.
What we will not do is quote you an outcome before we have read the file. Any figure offered to you at that stage is invented.
Who Runs This
Send the notice with the number and date visible and you will get a straight answer about the deadline — not a contact form queue.
[EXAMPLE] Maritza Delgado, CPA, MST
Partner, Tax
[email protected]