IRS Business Notice: Which Letter It Is and What to Do First

What do I do first when my business gets an IRS notice?

Find the CP or LTR number on the right corner of the notice, note the response date, and look the number up on IRS.gov before doing anything else. The IRS says to act by the due date if a notice asks for a response, and to reply by that date to guarantee your appeal rights if you disagree.

1. Write down the notice number, the tax period, the form it names and the response date.
2. Look the number up in the IRS notices and letters search.
3. Compare the notice with the return filed for that period and your payment records.
4. Agree, disagree or cannot pay in full. If you agree, do what it asks; you need not reply unless it asks. If you disagree, follow its instructions and send copies of your documents. If you cannot pay it all, pay what you can by the due date, which can reduce interest and penalty charges.
5. Keep the notice and a copy of everything you send.

A notice is not simple when it:

• mentions a levy or a lien;
• covers several periods or years;
• involves payroll tax;
• asks for a return the business never filed;
• charges a partnership or S corporation return penalty;
• charges a Form 5472 penalty on a business with a foreign owner.

A levy is the legal seizure of your property, such as a bank balance, for a tax debt; a lien is the government's legal claim against your property for an unpaid tax.

Bring those to a professional early; the section "Which IRS notices mean I should get professional help right away?" below says why. Do not let the response date pass while you look for help.

Gather: every page of the notice, front and back; the return filed for that period and the EIN; proof of each payment (bank statement or cancelled check); earlier notices on the same matter. If the books are too far behind to gather these, they come first: see catching up on overdue books.

Is the IRS letter to my business real?

The IRS says it normally makes first contact by mail delivered by the U.S. Postal Service. A call, email or text is not from the IRS if it is unexpected, rushes you, threatens you, asks for personal or financial information or demands payment now, and a social media direct message never is (IRS).

To check a letter, search its number in the IRS notices and letters search. If it does not appear or looks suspicious, the IRS says to call 800-829-1040 and follow the representative's instructions. The IRS telephone assistance page lists 800-829-4933 for businesses.

Two real contacts surprise business owners: a revenue officer who calls about employment tax before any balance due notice is mailed (the IRS says it also mails Letter 5857 with a call time; confirm using the number on that letter), and letters from private collection agencies (IRS).

Where is the notice number, and how do I look up what it means?

The CP or LTR number is on the right corner of the letter (IRS). Enter it in the IRS notices and letters search, or search by topic. A notice page says what the notice is about and what to do next. Some letters carry a Letter or LT number instead, such as Letter 1058. Call the phone number printed on the notice.

What do the common IRS business notices mean?

Each notice below has an IRS page that states what it is and the first step. The last column names the guide that handles the fix.

The IRS describes CP161 and CP215 only as an unpaid balance and a civil penalty; its pages do not say they are for businesses alone. Check the name and taxpayer number printed on the notice to see which account it concerns.

Other letters have their own guides:

• An audit letter: IRS audit of a small business.
• A payroll provider that did not pay the IRS: payroll provider did not pay your taxes.
• A revenue officer asking about unpaid payroll tax: trust fund recovery penalty.
• A Form 5472 penalty: missed foreign-owner filings.
• A late 1099 or W-2 penalty (Notice 972CG, per Publication 1586): late contractor and employee tax forms.

What if the notice says I owe money I think I already paid, or I disagree?

Compare each payment you made with the payments the IRS says it applied. On a CP161, the table above gives only 10 days from the notice date to report a missing payment or wrong figures.

1. Pull your proof for each payment: date, amount, the period and form it was meant for, and the bank record. Read the notice's payment list and math against your return.
2. Check the IRS side. The business tax account shows the balance by year and payment history; a tax account transcript shows payments, penalties, interest and the balance due.
3. Call the number on the notice with the documents in hand. The CP215 page asks for paperwork such as cancelled checks.
4. Pay what is not in dispute by the date shown. Interest continues on an unpaid balance after the due date.

Where a dispute goes depends on the notice:

• A balance or penalty notice (CP161, CP215): call the number on the notice. To dispute a penalty you can also send a signed letter with supporting documents saying why it should be reconsidered. The IRS may remove or reduce a penalty for reasonable cause, and the interest charged on that penalty goes with it (IRS). A business with a timely filing and payment record in the prior 3 years may also qualify for first-time penalty relief from a failure-to-file, failure-to-pay or failure-to-deposit penalty: First Time Abate, which you request, or the automatic exemption on eligible returns (IRS: administrative penalty relief; conditions in late-filing and late-payment penalties). Interest on the tax itself can be abated, on Form 843 or by signed letter, for unreasonable IRS error or delay that came after the IRS first wrote to you and that the business did not contribute to; file within 3 years after the original return or 2 years after paying the tax, whichever is later. That relief does not cover employment tax (IRS interest abatement).
• A CP504: call right away. The notice also explains how to ask for a Collection Appeals Program review before collection action. If you already paid or have an installment agreement, call anyway so the account reflects it (IRS).
• An LT11, Letter 1058 or CP297: a Collection Due Process hearing request on Form 12153, within the time limit described below.
• Still stuck: the IRS notice pages point to the Taxpayer Advocate Service, an independent organization within the IRS, and to Low Income Taxpayer Clinics. Publication 1660 says the Taxpayer Advocate Service cannot extend the time to request a hearing.

Do I still answer if the business was closed, had no activity, or the notice asks for an old Form 940?

For a CP259, yes. The CP259 page says a business with no employees or business activity in a period need not file a return for it but must still respond to the notice, using the enclosed Response form to explain why none is needed. If the business made deposits, payments or had credits for that period, it must file a signed return showing them to get a refund. For any other notice, follow its own instructions.

Four things to know before sending a Response form:

• "No activity" does not always mean "no return." A domestic partnership files Form 1065 unless it neither receives income nor incurs deductible expenditures or credits (Form 1065 instructions). A domestic corporation not exempt under section 501 must file an income tax return, generally on Form 1120, whether or not it has taxable income (Form 1120 instructions). An S corporation files Form 1120-S instead, but only while an election the IRS accepted remains in effect (Form 1120-S instructions); if a notice names Form 1120 for a business you treat as an S corporation, check the IRS acceptance letter first and see late S corporation election relief.
• An EIN sets filing requirements. When an EIN is issued, requirements are set for specific returns such as Forms 940, 941 and 1120. An unfiled one is treated as delinquent, with a notice for each form and period (CP259). That is why a business that never had employees can get a payroll notice.
• An old Form 940 or 941 notice. The CP259 page says no return is required for a period with no employees or business activity, but you still reply on the Response form. Yet after its first Form 941 a business generally files every quarter, even with no wages, until it files a final return (Form 941 instructions), and Form 940 has a no-payments box for an employer that paid no one in the year and a final-return box for a business that closed (Form 940 instructions). The CP259 page does not say how these fit together, so check the payroll history for that period before you reply; see behind on payroll taxes, and catching up on unfiled business returns for how far back the IRS normally asks for missing returns.
• A CP259 may cross with your filing. On the CP259 page the IRS says that if you filed within the last four weeks using the same name and EIN shown on the notice, you may disregard that notice. It says nothing like this for other notices.

To end a business's filing requirements, see which returns your business files and closing a company.

How long do I have, and what happens if I miss the date?

The date printed on your notice governs; the IRS sets no single deadline for all notices, and some carry a shorter window inside them.

Three things to know about levy notices:

• CP504 is not the hearing notice, and a hearing notice may not follow it. The IRS appeals FAQ says the IRS cannot levy with a CP504 alone: a formal notice of intent to levy and right to a hearing comes next (IRS). But that notice is required only once for each tax and period (section 6330(a)(1); Publication 1660), and the CP504 page says it follows only if you have not already received one. Check earlier notices for the same tax and period: if one went out, a levy can follow without another, and its request window may be running or over. A state tax refund can be levied without the notice. So can the property of a business that asked for a hearing on employment tax in the two years before the period levied (a disqualified employment tax levy); its hearing comes after the levy, as the CP297A page describes (section 6330(f) and (h)). Publication 1660 lists the other exceptions. The IRS still says to respond to the CP504 now rather than wait.
• Count the 30 days from the day after the date on the notice. The regulation counts from the notice date, not from receipt, so a notice read late does not extend it; calling the IRS does not either, and neither does living outside the United States (Treas. Reg. 301.6330-1; Publication 1660). The appeals FAQ says "from receipt"; follow the regulation. If the last day is a Saturday, Sunday or legal holiday, a request postmarked the next day that is none of those is timely (section 7503). The IRS can send the notice to the business's last known address (section 6330(a)(2)), so after a move or a change of responsible party, update it on Form 8822-B. Levy is generally not permitted during those days or while a timely request is pending.
• A late request is weaker. A request postmarked within one year of the levy notice date can still get an equivalent hearing, but levy is not barred and the decision cannot be taken to court (Publication 1660).

For liens, hearings and what pauses collection, see IRS payment plans for business tax debt.

Can my accountant or bookkeeper deal with the IRS for me?

A CPA, attorney or enrolled agent can, once the business signs Form 2848. The IRS instructions say the representative must be eligible to practice before the IRS; Part II lists who is, including attorneys, CPAs, enrolled agents, officers and full-time employees.

A bookkeeper outside those groups can be given Form 8821 to inspect and receive tax information, but not to represent the business. An unenrolled return preparer (a paid preparer who is not an attorney, CPA or enrolled agent) may represent a taxpayer only in an examination of a return that preparer prepared and signed, and needs a PTIN plus the IRS's Annual Filing Season Program record. That does not cover a balance due or levy notice, and such a preparer can never represent a taxpayer before revenue officers or appeals officers.

The IRS returns a Form 2848 whose line 3 does not name the matter, form and periods (it returns "All years" or "All taxes"), or that the wrong person signed. For a penalty not tied to a return, line 3 must say "Civil Penalty" or describe the penalty. For a corporation, an officer with legal authority to bind it signs. For a partnership, all partners sign, or one partner authorized under state law to act in its name, with a copy of that authorization attached. For the rest of the form, see IRS audit of a small business and switching accountants.

The form does not relieve the business of its tax obligations.

Where can I see every IRS letter and balance for my business?

The IRS business tax account shows the balance owed by year, payment history, tax transcripts, and notices and letters. The IRS page does not say every letter appears there, so act on the paper notice and the date printed on it.

A designated official renews the role every year. Without an account, a business transcript is available by mail on Form 4506-T or by calling the IRS business line (IRS). An entity transcript shows the business's filing requirements, which helps when a notice asks for a return you did not know you owed. "No record of return filed" soon after filing (allow 2 to 3 weeks after e-filing, 6 to 8 weeks after mailing) may only mean the return is not processed yet.

Which IRS notices mean I should get professional help right away?

Get help early when a wrong first move is costly or hard to undo, and keep the response date in view while you do. These features raise the stakes:

Example

These examples are illustrative; the amounts are in US dollars.

Two years of Form 1065 never filed

A two-member LLC taxed as a partnership had income in its first two years and never filed Form 1065.

• Years 1 and 2: each year's Form 1065 falls due after the year ends (March 15 for a calendar-year partnership, per the Form 1065 instructions); neither is filed.
• Year 3 or later: two CP259 notices arrive, one for each year. Each asks the LLC to file now or explain on the Response form why no return is needed.
• Response: the LLC had income, so Form 1065 was required for each year. The CP259 page says to file immediately, so it builds the books for both years from bank records and files both returns with all schedules.
• After: a penalty notice (CP162C) can follow for each late year. The penalty and relief guides show what the charge is. Small-partnership relief may fit if the LLC meets the conditions on the CP162C page, such as each member being a natural person who is not a nonresident alien and reported their share on a timely return (IRS).

An S corporation and a missing payment

An S corporation gets a CP161 for US$8,000. Its bank statement shows a US$5,000 payment that is not on the notice's list of applied payments.

It matches the payment's date, amount and period against the notice, checks the business tax account, and contacts the IRS within 10 days of the notice date with the bank record. If the IRS confirms the payment, the balance may fall to about US$3,000, before any interest and penalty. The S corporation pays what remains by the date shown, or asks about a plan.

A civil penalty notice

A consulting LLC gets a CP215 for US$2,400. The notice states the due date, the amount and the payment options. The owner looks on it for the penalty's name and tax period, then matches it to the guide that owns it: a late return penalty or a Form 5472 failure. If the filing was on time, or the notice does not make the penalty clear, the owner calls the number on it before paying, with proof of filing. If the penalty is correct, paying all US$2,400 by the due date stops further penalties and interest from adding up.

Different for you?

• A notice mentions levy, lists several periods, involves payroll tax or asks for a return you never filed, and the response date is close: the date is the clock. Which owner the notice concerns, which return to file first, whether a representative should reply and whether penalty relief fits depend on facts the notice does not show. Get corporate tax help now, and keep the response date in view while you do.
• Returns are missing for several years, or the books are too far behind to find the return or proof of a payment: follow catching up on unfiled business returns. Those returns are built from the books, so the books usually come first: see catching up on overdue books and bookkeeping help.
• The notice is a penalty: see late-filing and late-payment penalties, and small-partnership penalty relief for a Form 1065 charge.
• The notice is about payroll tax: see behind on payroll taxes and, if a revenue officer is involved, the trust fund recovery penalty.
• The business owes more than it can pay: see IRS payment plans for business tax debt.
• The letter is an audit: see IRS audit of a small business.
• A filed return was wrong and the notice shows a different figure: see correcting a filed business return.
• The business is owned from abroad and the penalty is for Form 5472: see missed foreign-owner filings.
• The notice is a CP2000 about your personal return: see the underreporter notice guide.