Common Tax Notices

Mastering Tax Notices

Every year, businesses receive tax notices from the IRS, state, and local agencies. Most are routine — if you respond correctly and on time. Here are the 20 most common notices, what each one means, and exactly what to do about it.

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Know every notice CP14 Balance due 21 days to respond ASSIGNED CP2000 Proposed adjustment Compare & respond IN REVIEW LT11 Intent to levy Act now — deadline running URGENT CP24 refund — resolved & documented
Why This Matters

A notice is only a problem if you mishandle it

Receiving a tax notice can be unsettling, but most notices are manageable — even routine — when you know what they mean and respond with attention and urgency. Responding correctly and on time helps you avoid unnecessary penalties, interest, compliance issues, and stress. The guide below covers the 20 notices businesses encounter most, organized by category, each with the action to take.

Golden Rules

Three rules for any notice, before anything else

1. Never ignore it — penalties and escalation only compound with silence. 2. Verify before you pay — agencies make errors too; compare the notice against your records. 3. Document everything — keep the notice, your response, proof of mailing, and confirmation receipts. If you do only these three things, you've avoided the worst outcomes.

The Reference

20 common tax notices — and what to do about each

Balances, Penalties & Collections

1

Notice of Balance Due

IRS CP14

The IRS believes you owe unpaid tax and gives you 21 days to pay (10 business days for balances of $100,000+). Interest accrues and collection activity can follow if unaddressed. What to do: Verify the amount against your records. Pay, dispute with documentation, or request a payment plan — the IRS offers installment agreements if you can't pay in full.

2

Notice of Failure to File

PENALTY 5%/MO

Issued when a required return wasn't filed by the deadline. The failure-to-file penalty is 5% of unpaid tax per month, capped at 25% — the most expensive penalty to ignore. What to do: File immediately, even if you can't pay. You can request abatement with reasonable cause, or First-Time Abatement if you have a clean three-year history.

3

Notice of Failure to Pay

PENALTY 0.5%/MO

Tax was filed but not paid by the due date. The penalty is 0.5% of unpaid tax per month (capped at 25%), plus interest. What to do: Pay what you can immediately to stop the accrual, set up an installment agreement, and request abatement if you have reasonable cause for the late payment.

4

Notice of Demand

VARIOUS

Demand notices range from simple payment reminders to final warnings, each escalating in urgency. Each includes an explanation and your options. What to do: Determine whether the demand is accurate before paying — agencies make errors. Then follow the notice's instructions: pay, complete the indicated form, or contact the agency to dispute.

5

Notice of Levy or Lien

LT11 · CP504 · CP90 · CP523

The most serious collection notices — intent to levy property (LT11, CP90), final balance-due warning (CP504), or intent to terminate an installment agreement (CP523). These arrive only after earlier notices went unanswered. What to do: Act immediately. Pay, arrange a payment plan, or request a Collection Due Process hearing within 30 days to preserve your appeal rights.

6

Notice of Trust Fund Assessment

LETTER 1153 · FORM 2751

The IRS intends to hold individuals personally liable for unpaid payroll withholding taxes via the Trust Fund Recovery Penalty — one of the few notices that pierces the business entity. What to do: You have 60 days to respond. Sign Form 2751 if you agree, or file a written appeal. Given personal liability, get professional representation involved early.

7

Notice of Estimated Payment Penalty

CP30

The IRS believes you underpaid estimated taxes during the year and has assessed a penalty, which may reduce your refund. What to do: Review the calculation carefully. If correct, pay per the timeline. If you qualify for an exception (uneven income, casualty, reasonable cause), file Form 2210 to request removal or reduction.

Filing & Information Requests

8

Notice of Information Requested

LETTER 12C

The IRS needs additional documents, forms, or verification before it can process your return. Processing pauses until you respond. What to do: Send the requested information within 20 days, exactly as instructed (fax or mail per the letter). Incomplete responses restart the clock.

9

Non-Filer Notice

CP59 → CP518

The IRS shows a filing requirement with no return on record. You'll typically get a reminder first (CP59), then a final notice (CP518). Ignore both and the IRS may file a substitute return for you — calculated without your deductions. What to do: File the return promptly, or respond explaining why no filing was required.

10

Statutory Notice of Deficiency

CP3219A

The "90-day letter": the IRS has information that differs from your return and is formally proposing additional tax. This is a legal determination, not a bill — yet. What to do: You have 90 days to either agree (sign and return Form 5564) or petition the U.S. Tax Court. The 90-day deadline cannot be extended — calendar it the day the notice arrives.

11

Identity & Credit Verification

CP75 · CP01B

The IRS is verifying your identity or auditing a claimed credit before releasing a refund. The refund holds until you respond. What to do: Provide the requested verification within the stated timeframe, through the channel specified in the notice. Respond quickly — these notices gate money already owed to you.

Audits, Adjustments & Determinations

12

Notice of Proposed Adjustment

CP2000

The underreporter notice: income reported by employers, banks, or payers doesn't match your return. It proposes a change — which can mean additional tax owed or a larger refund. What to do: Compare the notice line-by-line against your records. Agree by signing the response form, or disagree with documentation. Respond by the stated date to avoid it converting to a deficiency notice.

13

Notice of Audit

EXAMINATION

The IRS (or a state agency) is examining your return and will request specific documents. What to do: Respond by the deadline, provide exactly what's requested — no more, no less — and keep delivery confirmation for everything you send. Centralize all audit correspondence in one place; examiners notice organized taxpayers.

14

Notice of Determination

POST-AUDIT

The audit results: what the examiner found and any additional amount due. What to do: Pay the adjustment, or appeal within 30 days of the notice date. Most disputes are handled by your tax representative; unresolved cases escalate to the IRS Independent Office of Appeals or court.

Refunds, Credits & Account Changes

15

Notice of Refund Due

CP24

You paid more than you owed — the IRS is confirming an overpayment and adjusting your refund. What to do: If you agree, no response is required; the refund typically arrives in four to six weeks. If the amount doesn't match your records, contact the IRS before cashing anything. Then track the check — refunds that arrive unowned are refunds that go stale.

16

Refund Applied to Prior Balance

CP88

Your refund is being held or applied to an outstanding balance from a prior year instead of being paid out. What to do: Usually no response is required — but reconcile it. Confirm the prior-year balance is legitimate, record where the money went, and dispute promptly if the offset is wrong.

17

Notice of Deposit Error

REFUND MISMATCH

A refund arrived that doesn't match your records — possibly an IRS recalculation, possibly an error. What to do: Don't spend it. Verify whether the IRS adjusted your return (a notice usually explains the change). If there's no explanation, contact the IRS to correct it — erroneous refunds must be repaid, with interest if held too long.

18

Earned Income Credit Eligibility

CP09 · CP27

IRS records suggest you may qualify for the Earned Income Tax Credit but didn't claim it. What to do: Complete the eligibility worksheet enclosed with the notice and return it. If you qualify, the refund typically arrives within about eight weeks. Free money is rare — don't leave this one in the drawer.

State & Other Agencies

19

SUI Rate Change Notice

STATE AGENCY

Your state unemployment insurance rate has changed — these arrive annually and the new rate affects every payroll going forward. What to do: Update payroll systems immediately and recalculate. If prior quarters ran on the wrong rate, follow the notice's instructions to correct under- or overpayments. Route a copy to whoever owns payroll tax — this notice frequently dies in the wrong inbox.

20

SSA No-Match / Discrepancy

SSA

Employee names and Social Security Numbers in your filings don't match SSA records — usually a typo, a name change, or stale records rather than anything sinister. What to do: Identify the affected employees, have them verify and correct their information, and submit corrections to the SSA. Don't take adverse action against an employee based solely on a no-match notice.

The Method

How to respond to any notice — the 5-step discipline

1. Read & identify

Notice number, agency, entity, tax period, deadline. The notice number tells you exactly what you're dealing with.

2. Verify

Compare against your filings and payments before paying anything. Agencies make errors too.

3. Calendar the clock

Every notice has a deadline — 20, 21, 30, 60, or 90 days. Track it somewhere that doesn't depend on memory.

4. Respond in channel

Use the response method the notice specifies, and keep proof — certified mail receipts, fax confirmations, portal screenshots.

5. Document & close

File the notice, response, and confirmation together. A resolved notice without a record is a future audit problem.

Or Let the System Do It

Manage every notice with NOTICENINJA

Knowing the 20 notices is half the battle. The other half is operational: notices arriving at different addresses, deadlines on different clocks, and responses scattered across inboxes. That's the half NOTICENINJA automates.

  • Kata™ agentic data ingestion reads every notice on arrival — agency, entity, type, amount, deadline — and classifies it automatically
  • Every notice routes to the right owner, with the deadline already on the clock
  • Responses, documents, and confirmations live in one timestamped, audit-ready record
  • Teams resolve notices up to 60% faster — within 30 days, even from a backlog
Tax team resolving notices with NOTICENINJA

Never miss a notice again

NOTICENINJA automates tax notice management and compliance for corporations, service providers, CPA and compliance firms — so every notice gets a proper, timely response.

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FAQ

Frequently Asked Questions

What should I do first when a tax notice arrives? +
Read it completely and identify the notice number, agency, entity, tax period, and deadline. Then verify the claim against your own records before paying anything. Never ignore a notice — penalties and escalation compound with silence — and never pay without verifying, because agencies make errors too.
What happens if I miss a notice deadline? +
Consequences escalate: additional penalties and interest, loss of appeal rights (some windows, like the 90-day Tax Court deadline, cannot be extended), and eventually collection actions like liens and levies. If you've already missed a deadline, respond immediately anyway — and consider penalty abatement if you have reasonable cause.
Can penalties be removed? +
Often, yes. The IRS grants First-Time Abatement to taxpayers with a clean three-year compliance history, and reasonable-cause abatement when circumstances beyond your control caused the failure. State policies vary. Documentation is everything — which is one more reason to keep complete records of every notice and response.
How does NOTICENINJA help with these notices? +
Every notice — IRS, state, or local — is captured at intake by Kata™ agentic data ingestion, classified, routed to the right owner, and tracked against its deadline automatically. Responses and confirmations are stored in one audit-ready record, and dashboards show leadership every open item. Teams typically resolve notices within 30 days, even when starting from a backlog.
Can you help us clear an existing backlog? +
Yes. Backlogs create a cycle — unaddressed notices trigger duplicate and sequential notices that compound the problem. NOTICENINJA helps close out your backlog and stay backlog-free, with automated workflows, due-date tracking, and document management that let teams resolve notices within 30 days.

Frequently Asked Questions