Receiving a notice from the Internal Revenue Service (IRS) can be an overwhelming experience for any business owner and may automatically trigger fear and confusion. This is particularly true if the notice in your hands is an IRS Notice CP210 or CP220. These notices refer to specific tax issues that could potentially affect the financial standing of your business. However, understanding these notices, their implications and your possible response steps can drastically reduce this fear and confusion.
Understanding IRS Notice CP210
The IRS Notice CP210 pertains to the failure to deposit penalties for employment taxes. This could be due to late tax payment, non-compliance with deposit requirements, or failure to make deposits altogether. The notice essentially indicates that your business has been assessed a penalty for not complying with tax protocols. It’s a serious matter that requires immediate attention.
Understanding IRS Notice CP220
IRS Notice CP220, on the other hand, is issued when the IRS audits your business’s tax returns and proposes changes to your reported figures. This means that the IRS believes you might have underreported your income, claimed unauthorized deductions or exemptions, or made computational errors in your tax returns. The errors could result in an increase in your tax liability.
Possible Causes for Receiving IRS Notice CP210 or CP220
Two main reasons could lead to receiving these notices:
- Failure to comply with deposit requirements: If your business hasn’t been depositing payroll taxes or has been doing so inconsistently, the IRS may send you Notice CP210.
- Errors in tax reporting: If the IRS detects any inaccuracies or errors in your tax returns, it is likely to send you Notice CP220 to address those issues.
Steps to Take After Receiving IRS Notice CP210 or CP220
Upon receiving these notices, there are a few steps you can take:
- Review the notice: Carefully read the notice to understand the issues raised by the IRS. The notice usually details the discrepancy and how the IRS arrived at the revised amount.
- Calculation Check: Do a calculation check. Verify if the IRS’s proposed changes are accurate.
- Seek Professional Help: If you can’t resolve the issue yourself, consider seeking help from tax professionals. They can offer advice and guide you through the process of responding to the notices.
Frequently Asked Questions (FAQs)
What should I do if I disagree with the IRS Notice CP210 or CP220?
If you disagree with the IRS notices, you should respond detailing your disagreement, including any supporting documentation. If you cannot resolve it at your level, consider seeking professional tax help.
Will I get a penalty if I do not respond to the IRS Notice CP210 or CP220?
Failure to respond to IRS Notice CP210 or CP220 may lead to penalties, including fines and interest charges. In some severe cases, it could result in legal action.
In conclusion, IRS Notices CP210 and CP220 are important documents that demand serious attention. Ignorance or delay can lead to severe penalties and consequences. By understanding these notices and responding appropriately, you can avoid unnecessary penalties and safeguard the financial standing of your business.
