Received an IRS Letter? Here’s How Your Business Should Respond

Types of IRS Notices Businesses May Receive

• Audit/Examination Notices: The IRS is reviewing your tax return in detail. See our Business Tax Audits resource for more information.
• CP2000 – Proposed Changes: The IRS found a mismatch between your return and information from other sources (banks, vendors, payroll reports).
• Balance Due/Collections: You owe taxes, penalties, or interest. Collection notices may escalate if not resolved; learn more at Tax Collections.
• Penalty Assessments: The IRS assessed penalties for late filing, late payment, or other violations.
• Missing Return/Filing Requests: The IRS did not receive a required tax return for your business.
• Information Requests: The IRS seeks additional documentation before making a determination.
• Intent to Levy or Lien: The IRS may pursue legal action to collect unpaid taxes—see Business Tax Controversy & IRS Dispute Resolution.
• Other Notices: The IRS issues dozens of standardized letters and forms—each with a unique code in the top right corner (e.g., CP, LTR, or Notice numbers).

For a deeper dive into notice types and codes, visit our Understanding IRS Notices and How to Respond article.

First Steps: What to Do Immediately When You Receive an IRS Notice

1. Don’t Panic—But Don’t Ignore It. Delaying action only increases risk. Every IRS notice includes a response deadline; missing it can limit your rights or increase penalties.
2. Confirm the Notice Is Genuine. Verify that the notice is an official IRS communication. IRS notices are mailed or, in limited cases, sent via secure digital accounts—never by email or phone call demanding immediate payment.
3. Note Key Deadlines and Action Items. Highlight the response date, amounts due, and any documents requested.
4. Gather Your Records. Locate tax returns, financial statements, supporting documents, and any previous correspondence related to the year or issue in question.
5. Consult a Qualified Professional. Consider speaking to an ex-IRS agent, tax attorney, or accountant—especially if the notice is unclear, involves large amounts, or alleges wrongdoing. Start here: How It Works.

How to Read and Understand Your IRS Notice

• Notice/Letter Number: Identifies the type of issue (top or bottom right).
• Summary of Issue: Why the IRS is contacting you.
• Proposed Changes: Adjustments to income, deductions, or credits.
• Requested Actions: What you must do next (e.g., pay, respond, provide documents).
• Deadlines: When a response or payment is due.
• Contact Information: IRS phone number, address, and fax for reply.

Tip: Compare your IRS notice to samples and explanations on our IRS Notices resource page.

How to Respond: Step-by-Step Process

Audit or Examination Notices

1. Read the audit notice carefully. Identify the years and items under review.
2. Gather all documentation. Receipts, ledgers, payroll records, and tax returns.
3. Consider professional representation. The IRS allows business taxpayers to have a tax attorney, CPA, or enrolled agent handle all communications—see Business Tax Audits.
4. Prepare your response. Organize evidence and respond to each IRS question.
5. Meet deadlines. Request an extension if you need more time.

CP2000 or Proposed Changes

• Review the IRS’s proposed adjustments.
• Compare IRS data to your own records.
• If you agree, sign and return the response with payment (if owed).
• If you disagree, provide a written explanation and attach evidence.

Tip: Our Business Tax Filing page covers best practices for handling return discrepancies.

Balance Due/Collections Notices

• Do not ignore collection notices. The IRS can levy bank accounts or file liens if balances remain unpaid.
• Explore payment plans, Offer in Compromise, or penalty abatement.
• Get immediate help via our Tax Collections resource.

Penalty Assessments

• Review the notice for penalty codes.
• Consider requesting penalty abatement due to “reasonable cause” (illness, disaster, honest error).
• Provide documentation supporting your request.

Missing Return or Filing Request

• File the missing return ASAP—even if you can’t pay the full balance.
• Explain any delays in your cover letter.

When and How to Appeal

• If you disagree with any IRS decision, you have the right to appeal.
• File a written protest or request a conference with IRS Appeals.
• Learn about your rights at Business Tax Controversy & IRS Dispute Resolution.

Documentation and Evidence: What the IRS Expects

• Tax returns and schedules
• Bank statements
• Invoices and receipts
• Payroll and employment records
• Contracts and agreements
• Correspondence with the IRS or state tax agencies

Always keep copies of everything you send to the IRS and track communications.

What If You Disagree? IRS Appeals and Taxpayer Rights

• Right to Appeal: File within the specified deadline. Appeals may be formal (IRS Appeals Office) or informal (manager conference).
• Right to Representation: You may have a tax attorney, CPA, or enrolled agent represent your business at all stages.
• Taxpayer Bill of Rights: Includes the right to challenge the IRS, confidentiality, and a fair and just tax system. More at Business Tax Controversy.

Common Mistakes to Avoid

• Ignoring IRS deadlines
• Providing incomplete or inaccurate responses
• Paying without verifying notice accuracy
• Discussing your case with the IRS without professional guidance
• Discarding or losing original IRS letters

How a Tax Attorney/Ex-IRS Agent Can Help

• Interpret complex IRS language and codes
• Draft responses and appeals that protect your interests
• Negotiate with IRS agents on your behalf
• Represent your business at audits, appeals, or in U.S. Tax Court
• Identify penalty relief, settlements, or other options you may not know exist

Get help today: Contact our nationwide team of ex-IRS agents, LLM tax attorneys, and accountants for a confidential review—Contact Us.

Recent IRS Trends & Regulatory Updates (2024–2025)

• Digital Notices: The IRS is piloting new secure portals for notice delivery and response. Always verify any digital communication through the IRS’s official website.
• Automated Penalties: Increased use of AI for penalty assessment—especially for late payroll and income tax filings.
• Hot Audit Areas: The IRS continues to focus on ERC claims, cryptocurrency transactions, large cash businesses, and S-corp/partnership compliance.
• Appeals & Settlement Options: IRS continues to promote Offer in Compromise and streamlined installment plans for qualified business taxpayers.

For more insights, see our articles:
Do I Qualify for an Offer in Compromise?
Expert Strategies to Manage and Resolve Business Tax Debt

Frequently Asked Questions (FAQs)

I received a CP2000 notice—does this mean I’m being audited?

Not necessarily. A CP2000 means the IRS found a mismatch; you may resolve it without a full audit. Learn more here.

Can the IRS seize my business assets if I don’t respond?

Yes, the IRS can levy accounts, garnish wages, or place liens if tax debts remain unresolved. Don’t wait—contact us for immediate help.

Do I need a lawyer to answer an IRS notice?

While not always required, professional guidance is strongly recommended—especially for audits, disputes, or collections. Our team includes ex-IRS agents and attorneys for business representation nationwide.

Can I set up a payment plan?

Yes. Most businesses qualify for installment agreements. See Tax Collections for details.

What if I lost the IRS letter?

Log in to your IRS account online or call the IRS directly for a duplicate. Keep records of all correspondence moving forward.

Next Steps & Call to Action

If your business received an IRS notice, fast, informed action is your best defense.
America’s Tax Defender represents businesses nationwide, bringing decades of IRS experience, legal acumen, and practical solutions to every case.

• Get a confidential, no-obligation review from an ex-IRS agent, LLM tax attorney, or business CPA.
• Learn how our IRS dispute resolution process works.
• Schedule a consultation today via our contact page.