How to Handle IRS Notices — Complete Practitioner Guide
The Most Common IRS Notices and How to Respond
| Notice | What It Means | Response Deadline | Response Strategy | Fee Range |
|---|---|---|---|---|
| CP2000 (Underreporter) | IRS proposes changes based on information returns (1099s, W-2s) not matching the return | 60 days (or 30 days if second notice) | Agree (sign and return); disagree (provide explanation and documentation); or partially agree | $300–$800 |
| CP501/CP503/CP504 (Balance Due) | IRS is requesting payment of a balance due | 30 days (CP501); 10 days (CP504 — levy warning) | Pay in full; request installment agreement; request CNC status; consider OIC | $300–$600 (installment agreement) |
| CP90 (Final Notice of Intent to Levy) | IRS intends to levy assets; last notice before levy | 30 days (Collection Due Process hearing right) | Request CDP hearing immediately; this stops the levy while the hearing is pending | $500–$1,500 |
| CP523 (Intent to Terminate Installment Agreement) | IRS intends to terminate an existing installment agreement | 30 days | Cure the default (make the missed payment); request reinstatement; or request CDP hearing | $300–$600 |
| LT11 / Letter 1058 (Final Notice) | Final notice before levy (same as CP90) | 30 days | Request CDP hearing immediately | $500–$1,500 |
| Letter 525 / 531 (Audit — 30-Day Letter) | IRS is proposing changes after an audit; taxpayer has 30 days to appeal | 30 days | Agree; disagree and appeal to Appeals; or do nothing (IRS will issue 90-day letter) | $1,500–$5,000 |
| Letter 3219 (90-Day Letter / Statutory Notice of Deficiency) | IRS has determined a deficiency; taxpayer has 90 days to petition Tax Court | 90 days (no extension) | Petition Tax Court; or pay the deficiency and file a refund claim | $3,000–$10,000+ |
Source: IRS.gov/notices; IRS Publication 594; IRS Publication 1660
When a client receives a CP90 or LT11 (Final Notice of Intent to Levy), the 30-day deadline to request a Collection Due Process (CDP) hearing is critical — and it cannot be extended. If the client misses the 30-day deadline, they lose their right to a CDP hearing and the IRS can levy their wages, bank accounts, and other assets immediately. Practitioners should treat CP90 and LT11 notices as emergencies — contact the client within 24 hours and file the CDP hearing request (Form 12153) immediately.
The IRS Notice Response Workflow
| Step | Action | Timeline | Notes |
|---|---|---|---|
| 1. Identify the notice | Read the notice carefully; identify the notice type and deadline | Day 1 | CP notices have a number; letters have a number; both have a response deadline |
| 2. Pull the client's return | Compare the notice to the client's return; identify the discrepancy | Day 1–2 | Most CP2000 notices involve unreported income or incorrect deductions |
| 3. Research the issue | Determine if the IRS position is correct, partially correct, or incorrect | Day 2–3 | Check the client's records; verify the IRS's numbers |
| 4. Develop the response strategy | Agree, disagree, or partially agree; determine what documentation is needed | Day 3–4 | Document your analysis in writing |
| 5. Draft the response | Write the response letter; attach supporting documentation | Day 4–7 | Be clear, concise, and professional; cite IRC sections if disputing |
| 6. Client review | Have the client review and sign the response | Day 7–10 | Explain the response to the client; get their approval |
| 7. Send the response | Send by certified mail with return receipt; keep a copy | Day 10–14 | Always send by certified mail; keep proof of mailing |
| 8. Follow up | Monitor for IRS response; follow up if no response in 60 days | Ongoing | IRS response times: 60–120 days for most notices |
Source: IRS Publication 594; IRS.gov/notices
Opening: "Dear IRS, I am writing in response to the CP2000 notice dated [date] for taxpayer [name], SSN [last 4 digits]. I respectfully disagree with the proposed changes for the following reasons:"
Body: "[Explain the discrepancy. Example: 'The 1099-B from Fidelity Investments showing $45,000 in proceeds was reported on Schedule D of the taxpayer's 2025 return. The taxpayer's basis in the securities was $38,000, resulting in a $7,000 capital gain — which was reported on line 7 of Form 1040. The proposed change appears to be treating the $45,000 in proceeds as unreported income rather than a capital gain. Please see the attached Schedule D and 1099-B for verification.']"
Closing: "Please contact me at [phone/email] if you need additional information. I am available to discuss this matter at your convenience. Respectfully, [Your Name], EA/CPA, [PTIN]"
IRS Notice Response Fees
| Notice Type | Complexity | Typical Hours | Fee Range | Success Rate |
|---|---|---|---|---|
| CP2000 (simple — income already reported) | Low | 1–2 hours | $300–$500 | 90%+ |
| CP2000 (complex — disputed income or deductions) | Medium | 3–5 hours | $600–$1,200 | 70–85% |
| CP504 (balance due — installment agreement) | Low–Medium | 2–4 hours | $400–$800 | 95%+ |
| CP90 / LT11 (CDP hearing request) | Medium–High | 3–8 hours | $600–$1,500 | Stops levy; outcome varies |
| Letter 525 (audit — 30-day letter appeal) | High | 5–15 hours | $1,500–$4,000 | 60–80% at Appeals |
| Letter 3219 (90-day letter — Tax Court petition) | Very High | 10–30+ hours | $3,000–$10,000+ | Varies by case |
Source: NATP IRS Representation Survey 2024; ASTPS Fee Survey 2024
Background: Client received a CP2000 notice proposing $45,000 in additional income and $12,600 in additional tax. The IRS claimed the client had unreported 1099-MISC income. Review: the income was reported — but on a different line of the return than the IRS expected (it was reported as self-employment income on Schedule C, not as "other income" on Schedule 1). Response: wrote a one-page explanation letter with a copy of Schedule C showing the income was reported. IRS response: notice withdrawn; no additional tax due. Client saved $12,600. Practitioner fee: $450. Time: 2 hours. ROI for client: 28:1.
Frequently Asked Questions
A CP2000 notice is an "underreporter inquiry" — the IRS is proposing changes to your return based on information returns (W-2s, 1099s) that don't match what was reported on the return. The IRS is not saying you did anything wrong — they are asking you to explain the discrepancy. Most CP2000 notices can be resolved by providing documentation showing the income was reported correctly.
A CP504 is a "Notice of Intent to Levy" — it is a warning that the IRS may levy your state tax refund if you don't pay. A CP90 (or LT11) is a "Final Notice of Intent to Levy" — it is the last notice before the IRS can levy your wages, bank accounts, and other assets. The CP90 triggers a 30-day deadline to request a Collection Due Process hearing, which stops the levy while the hearing is pending.
The IRS typically takes 60–120 days to respond to a notice response. During this time, the IRS should not take any collection action. If you don't receive a response within 120 days, call the IRS Practitioner Priority Service (PPS) at 1-866-860-4259 to check the status.
A CDP hearing is an administrative hearing before the IRS Office of Appeals. You can request a CDP hearing within 30 days of receiving a Final Notice of Intent to Levy (CP90 or LT11). The CDP hearing stops the levy while the hearing is pending. At the hearing, you can propose collection alternatives (installment agreement, OIC, CNC status) or challenge the underlying tax liability.
First, determine whether any deadlines have passed. If the response deadline has passed, the client may have lost certain rights (e.g., the right to a CDP hearing, the right to appeal). In some cases, you can still request an equivalent hearing (within 1 year of the CDP deadline) — but the equivalent hearing does not stop the levy. Contact the IRS immediately to determine the current status of the account.
For simple notices (CP2000 with a clear explanation), you can call the number on the notice to explain the discrepancy. However, always follow up in writing — by certified mail — to create a paper trail. The IRS phone representative cannot guarantee that your explanation will be accepted; a written response is always more reliable.
The information on this page is intended for licensed tax professionals (CPAs, EAs, and tax attorneys) and is provided for educational and research purposes only. Tax law is complex and fact-specific — all strategies discussed are subject to limitations, phase-outs, and conditions that may not apply to every client situation. Practitioners should independently verify all information against current IRS guidance, Treasury Regulations, and applicable state law before advising clients. This content does not constitute legal or tax advice.
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