When you’re a business owner, getting a tax notice from the IRS can feel unsettling. If you do receive a notice – there is no need to panic. Many IRS notices can be resolved easily.
To help avoid getting an IRS notice, or reduce the number of notices you receive, it’s important to always file your tax returns correctly and on time.
Below we cover some of the more common IRS notices related to payroll. We cover why you might get a notice, the common payroll-related IRS notice types, and steps to resolve them.
What is an IRS Notice?
An IRS notice is an official document from the Internal Revenue Service (IRS) that informs taxpayers of changes to their tax liability, potential penalties for noncompliance, or other updates. The notice may also be used to request additional information or documentation in order to complete a tax return or assessment.
Examples of common IRS notices include notices of assessment, notices of deficiency including a balance due, notices of proposed penalty.
Reasons for getting an IRS notice
While it can seem like the IRS is targeting you when they send you a notice, generally speaking, there’s usually a valid reason. It’s an opportunity to correct an issue, provide additional information, or take note of an important change so you can file future tax returns accurately and on time.
Common reasons the IRS contacts a business include:
- A math error or missing tax information
- Tax payment or tax amount is past its due date or incorrectly filed
- Discrepancies between what you report on your tax forms and what the IRS shows in their records
- A change in frequency of payroll tax deposits
- Notification of a balance owed
- Questions about a tax return, a delay in processing it, or requests for additional information
Common tax notices for businesses
Here are some of the more common IRS notices your business could receive and what they’re for:
Notice CP134B
Notice CP134B is sent if the IRS has found a discrepancy between the amount of federal tax deposits you reported on your tax return and the amount credited to your account. You should verify your deposits and what you submitted on your tax return to look for the discrepancy. If you did make an error, you should remit payment to the IRS. If you do not find a discrepancy you should contact them to discuss further.
Notice CP136
You will receive notice CP136 if the IRS finds a change in your payroll deposit requirements from the previous tax year, This is just an informational notice to let you know when deposits need to be made going forward.
Notice CP162
You will receive a notice CP162 if you filed a tax return late, it was incomplete, or you failed to file it electronically. This notice of a penalty is typically sent to the owners of partnerships or S-corps. If you agree with the penalties you should remit payment within 21 days. If you do not agree you will need to file a dispute letter to the IRS within 21 days.
Notice CP250A
Notice CP250A indicates that your federal employment tax filing requirement has changed and you no longer meet the criteria for filing an annual Form 944. This means you must switch to a quarterly Form 941. There is no action to take for this IRS notice, but you should begin filing the 941 as instructed.
Notice CP259
A notice CP259 is confirmation that you didn’t file a tax return for the periods specified in the notice. If you did not file your return, you should do so immediately to avoid paying additional penalties. If you feel a return is not needed, or it was mailed – you should contact the IRS to discuss.
Notice CP2100 or CP2100A
A notice CP2100 or CP2100 means a filed tax return is showing an incorrect or missing name or federal tax ID number. Updating the form with the correct information will resolve the issue.
Levies and Garnishments
A levies and garnishment notice will reflect a garnishment order for an employee. Once received you will be required to adjust the employee’s wages to withhold a portion that will then be remitted to the specified agency.
What to do if you get a tax notice
Once you receive a notice from the IRS you should open it immediately and carefully read all the information provided. Depending on the notice your receive, it could be a simple resolution or require a little research.
Here’s a step-by-step guide for how to handle an IRS notice:
1. Open the letter promptly and review all information
When you get a tax notice, open and read it right away. You’ll often see time-sensitive instructions that require a response by a certain deadline. If you miss that deadline, you can create complications — including the potential of a full tax audit and even a lien on your business.
Also make sure to thoroughly review all information in the notice. For example, if it’s about a changed or corrected tax return, compare the information in the notice to what’s on the original return. If the information is correct, all you need to do is note the correction for your own records. If more is needed from you — such as a payment or additional information — or if you don’t agree with what’s in the notice, then you can contact the IRS.
2. Take action as requested and keep copies for your records
Only reply if you’re instructed to do so. If the IRS needs a response from you, either respond in writing as specified or call the phone number included in the notice. If you need to make a payment, you should also do so at this time.
Always make and keep a copy of the original notice, along with the response you eventually provide to the IRS (if any), so that all information is saved in your own records in case you need to refer to it later.
3. Notify the IRS of a disputed notice
In some cases, you may disagree with the IRS. In this event, send a letter to the IRS explaining why you dispute the tax notice and mail it to the mailing address included within the notice. Make sure to include all supporting information and tax documents that help the IRS review your dispute.
4. Be aware of scams
Stay alert to the fact that the IRS will first contact you through the mail, and never contact you through email, social media, or text message. If you receive a suspicious message, refrain from replying and giving out personal information that can result in serious financial loss.
Instead, you can always verify if you owe money to the IRS by viewing your account information. You can also learn more about how the IRS contacts taxpayers to further protect yourself from scams.
Paying attention to payroll taxes, tax laws, federal and state taxes, are all big parts of owning a small business. Getting them right means less headaches for you. Our wage and tax portal offers many guides and resources to help you stay on top of your payroll tax requirements. Of course using a software or service can also help reduce IRS notices from landing in your mailbox.
