What to Do When You Receive an IRS Letter (Before It Gets Worse)

“Most IRS problems don’t start with aggressive enforcement. They start with confusion, missed deadlines, and ignored letters.” - Tax Resolution Insight

Introduction:

Receiving an IRS letter can feel like a crisis especially if you already owe money or have ongoing tax debt. But the truth is, IRS correspondence doesn’t automatically mean disaster. Most IRS notices are routine and resolvable if you act correctly and quickly. Ignoring that letter, however, can absolutely make things worse.

The fastest way to turn a simple IRS notice into a serious tax problem is to do nothing.

In this guide, we’ll break down exactly what you should do first, the steps to take next, and how to protect yourself from scams so you can resolve the issue before penalties, liens, or levies happen.

1. Don’t Ignore It. Open the Letter Immediately

The most common mistake taxpayers make is setting an IRS letter aside and hoping it will disappear. It won’t. IRS notices come with strict deadlines, often between 21 and 30 days from the date on the letter. Missing that deadline can result in losing your appeal rights, accumulating additional penalties and interest, or triggering IRS collection actions.

As soon as you receive the letter, open it and read it carefully. Do not delay. Pay close attention to the notice number, usually located in the top right corner of the page, as it identifies exactly what type of issue the IRS is addressing and what response is required.

2. Read the Notice Carefully... Understand What It’s Asking

Not every IRS letter means you are in serious trouble. Many notices are informational and may simply notify you of a corrected refund amount, a request for additional documentation, a change made to your account, or a balance due.

Every IRS notice contains specific instructions. Reading it thoroughly allows you to understand what the IRS is requesting and gives you control over how to respond. Focus on why the letter was sent, whether the IRS believes you owe money, whether you agree or disagree with their position, and the exact deadline by which you must respond.

3. Determine Your Next Step

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If You Agree With the IRS

If, after reviewing the notice, you determine that the IRS is correct such as when a balance is legitimately owed, it’s important to take action immediately. Follow the payment instructions included in the notice and pay as much as you can, even if you are unable to pay the full amount. Taking action demonstrates good faith and can reduce penalties and interest. You may also explore options such as payment plans, offers in compromise, or other IRS resolution programs that can make repayment more manageable.

If You Disagree With the IRS

If you believe the IRS is wrong, you have the right to respond, but timing is critical. You should prepare a clear written explanation detailing why you disagree, include copies of supporting documents, and mail your response to the address listed on the notice. Responding before the deadline is essential to preserve your appeal rights and prevent the issue from escalating.

4. Try Not to Panic And Don’t Call Unless Instructed

Calling the IRS immediately is not always the best move. Many IRS notices do not require a phone call, and contacting the IRS unnecessarily can result in long hold times without resolving the issue. Only call if the letter specifically instructs you to do so.

If you are required to call, use the phone number provided on the notice. Have the letter and your tax return available, and keep detailed notes of the conversation, including the agent’s name, identification number, and the date and time of the call.

5. Set Up Payment or Resolution Options if You Owe

If the IRS determines that you owe money, it’s important to understand that you are not alone and that options exist. Many taxpayers cannot pay their full balance immediately. Depending on your situation, solutions may include installment agreements, offers in compromise, or temporary hardship status. Even making a partial payment by the deadline can significantly reduce penalties and help prevent the situation from escalating.

6. Keep Copies. Organization Is Your Friend

Maintaining organized records is one of the best ways to protect yourself when dealing with the IRS. Always keep the original notice, copies of any correspondence you send, proof of mailing or delivery, and a log of all communication dates and details. Proper documentation can be invaluable if questions or disputes arise later.

7. Beware of Scams. Verify Legitimacy

Scammers often target people who owe taxes by sending fake IRS letters that look legitimate. Be cautious if a notice contains threats of immediate arrest, demands payment via gift cards, cryptocurrency, or wire transfers, contacts you by email or text as the first communication, or appears poorly formatted or missing official logos. If something feels suspicious, verify the notice number before responding or taking any action.

8. Get Professional Help (Especially for Tax Debt)

Tax debt situations can escalate quickly, particularly when multiple years are involved or when the IRS is considering enforcement actions. A qualified tax professional can help interpret complex notices, communicate with the IRS on your behalf, negotiate payment or settlement options, and help prevent liens, levies, or wage garnishment. You do not have to handle this process alone.

Final Thought: Acting Fast Matters

The IRS isn’t out to ruin you, but delays and inaction can turn a manageable issue into a serious financial problem. Taking prompt, informed action can save you money, protect your rights, and put your tax debt back on a manageable path.

Other resources to help you get started

Confused by an IRS letter? You’re not alone. IRS notices are intentionally confusing, and misunderstanding the wrong one can cost you thousands of dollars in penalties, interest, or even trigger collections actions such as liens or levies.

To help taxpayers take the right next step, we created a free, plain-language IRS Notice Cheat Sheet designed specifically for people who owe the IRS or state tax agencies. This resource breaks down IRS letters in a way that’s easy to understand, without legal or technical jargon.

The cheat sheet helps you quickly determine how serious your notice really is, what the IRS is actually saying behind the formal language, which deadlines matter most, and what actions you should take next. It also explains common mistakes taxpayers make that can make an IRS problem worse and how to avoid them.

If you’re unsure how to interpret your notice or what to do next, this resource can help you gain clarity and take action before the situation escalates.

Click this link to get it for free: https://carosgroup.com/irs-notice-guide