A client will call you and say “I got a letter from the IRS.” Here’s your playbook.
Step 1: Stay Calm
Most IRS notices are not audits. Many are routine. But they all require attention.
Step 2: Identify the Notice
Every IRS notice has a number in the upper right corner. The number tells you what you’re dealing with.
CP2000: The IRS found a discrepancy between the return and third-party reporting. This is the most common notice your clients will receive. CP14: Initial balance due notice. The client filed but didn’t pay in full. CP501 through CP504: Balance due reminders with increasing urgency. CP504 is a notice of intent to levy. Letter 525 or 566: Examination notification. This is an audit.
Step 3: Check the Deadline
Every notice requiring a response has a deadline, usually 30 or 60 days from the date printed on the notice. Missing the deadline can result in the IRS defaulting to their proposed changes.
Step 4: Compare to the Return
Pull up the return you prepared. Does the notice match? If it’s a CP2000, check whether the income flagged was actually reported, perhaps on a different line. Sometimes the IRS matching system misses income that was reported in an unexpected location.
Step 5: Determine Your Scope
A simple CP2000 where income was already reported? You can help the client draft a response. A CP504 notice of intent to levy? That’s a collection matter requiring a resolution professional. An audit letter? Refer to an enrolled agent, CPA, or attorney who handles examinations.
Step 6: Respond in Writing, by the Deadline
If you’re helping the client respond, do it in writing. Keep a copy of everything sent. Send it to the address on the notice.
The ability to handle IRS correspondence calmly and competently builds client loyalty faster than almost anything else you can do. Your client will remember that you were the person who helped when the IRS letter showed up.
For training on IRS notices, client management, and knowing when to refer, visit musespring.com.