How to Respond to an IRS Notice - You Don’t Agree with a Proposed Change

Your response should address only the issue raised in the notice

Getting a notice from the IRS can feel 

unsettling, especially when it says you 

owe more money than you had reported.

The good news, the first notice is typically “proposed” changes, that provides you with the right to respond — and if you disagree with the Internal Revenue Service’s (IRS) or any taxing agency’s proposed changes, you should respond within the time stated on the notice. A clear, timely response is often enough to correct the issue.

Step 1: Understand the Notice

Every piece of correspondence or notice includes important information and each separate year should be address in a separate response:

• The tax year in question

• The proposed changes to your return (or purpose)

• The new balance due (if any)

• The deadline to respond

Responding to each year separately and with its own response, while it feels inefficient to you, will reach the unit working that particular year and issue you received a notice about. Do not ignore the deadline. Once it passes, changes are finalized and more difficult but not impossible to address and assessed changes will begin collection action if not paid by the same stated deadline.

If your position is you partially agree, and there would be a balance due although not what the IRS stated, if you are able, it is better you make that payment at the time you discover the error. 

Step 2: Review Your IRS Transcript

Before gathering paper documents, log in to your IRS Online Account. Your account transcript shows the income and information reported under your Social Security number (SSN) by employers, banks, and other payers to the IRS.

This is the same data the IRS uses to compare against your filed tax return of the same year. When you review this information first you are not gathering information at random, and it allows you to decide if the notice may have uncovered a mistake that once correct will match the return you filed. Alternately, it may move you straight to agreeing with the oversight and determining how you can pay this new tax due – either way time is saved on your part. 

Checking it first helps you:

• Spot duplicate or incorrect reporting by third parties

• Confirm whether you accidentally left something off your return

• Narrow down exactly what the IRS based its adjustment on

Because your IRS account is directly tied to your SSN, updates and responses through this system attach directly to your account, eliminating the inbound processing and often resolve faster than mailed correspondence. Not to mention, you can send the response 24/7 with a time-to-date digital receipt, avoiding a trip to the post office to send certified for the same record keeping power.

Step 3: Gather Supporting Proof

Once you know what the IRS sees, gather your records to confirm the correct numbers. EVEN when the IRS includes missing income, it may not result in a change in the actual taxable income.  For example, it is very common when someone rolls over a retirement account, they leave it off their return because they are aware “it’s not taxable”.  This is a case of “not showing your work” - the distribution of income must be reported first then the reason it is not taxable is explained on the tax preparation. Additionally, if there are other credits on the return – this “increased income” may adjust those credits, and this should be reviewed and addressed in your response also.

Examples of documents that will support your original filing include:

• W-2s, 1099s, or corrected forms

• Bank or brokerage statements

• Receipts or canceled checks for deductions

• Prior year returns for consistency

Always make copies of your documents to attach. Never send your originals documents in the mail.

Step 4: Write a Focused Response

Your response should address only the issue raised in the notice. Keep your statement as to why you disagree short, clear, and supported by documentation. It is likely to be processed when the employee tasked can see the issue plainly rather.  For example, “ I disagree with your proposed tax calculated, we sold a significant amount of long-term stock and used the capital gains rules rather than the tax table to calculate the tax on the original return.” In this example, we would provide a summary of the brokerage tax statement and the capital gains and dividends tax worksheet.”

Every response letter should include:

• Your name, address, and the notice number

• A direct statement that you disagree with the proposed changes

• A brief explanation of why, supported by your documents

• Copies of the evidence, labeled and organized

• PLUS, each page should be numbered and include your SSN

Step 5: Send Your Response

Best option: If your notice allows it, upload your response through your IRS Online Account. This links directly to your file and cuts down processing time.

Fax: If your notice provides a fax number then use this as the second option.  Include the exact number of pages on your coversheet

If mailing: Always send by certified mail at minimum, a return receipt requested is a personal choice. This gives you proof that the IRS received your response before the deadline and should there be a delay in processing, reduce potential penalties associated.

Step 6: Wait for the Review

Once the IRS receives your response, they will review your explanation and supporting documents. If they agree, the adjustment will be withdrawn or revised. If they do not agree, you may receive another notice or have the option to appeal. Unfortunately, it can take between 12 to 16 weeks for some items to process, and you might receive a letter requesting more time if your letter is handled by a busy unit.

Therefore, it's important to follow up and not assume that "no news is good news," which is another reason to sign up for your IRS (or state) account.

Final Thought

Dealing with an IRS notice doesn't have to be daunting. Stay focused: address only the issue mentioned, utilize your IRS Online account whenever possible, and keep your documentation well-organized. For many taxpayers, this is sufficient to resolve the issue quickly.

If the amounts are significant, or if you feel unsure, don't hesitate to seek professional assistance from an Enrolled Agent, CPA, or tax attorney. Sometimes, a bit of expert guidance can be very beneficial.

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