IRS Letter 950C: Responding to an IRS Deficiency Notice
Summary:
IRS Letter 950C is a formal notification sent to taxpayers after an IRS audit to propose a tax deficiency or over-assessment. This letter gives taxpayers the right to either agree with the findings or file an appeal if they disagree. Acting promptly is essential, as taxpayers typically have 30 days to respond. Understanding Letter 950C and consulting with a tax professional can help you make informed decisions on whether to accept the findings or contest them through an appeal.
Receiving IRS Letter 950C can be intimidating, especially when it involves a proposed change in your tax liability. This notice arrives after the IRS has completed an audit of your tax return and wants to notify you of a potential deficiency (an amount you owe) or an over-assessment (a reduction in your tax liability). As daunting as this letter might seem, you have the right to review the findings, agree or disagree, and appeal if necessary. In this article, we’ll explain what IRS Letter 950C entails, how to respond, and what steps to take if you decide to appeal the IRS’s findings.
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What is IRS Letter 950C?
Understanding the purpose of IRS Letter 950C
IRS Letter 950C, also known as a “30-day letter,” is issued to notify taxpayers of changes to their tax liability after an audit. This letter serves as a formal communication informing you of the IRS’s findings. Depending on the outcome of the audit, you may be notified of a “deficiency” or “over-assessment” in your taxes:
- Deficiency: A deficiency indicates that the IRS believes you owe additional tax beyond what you originally reported. This amount could stem from errors, omitted income, or discrepancies found during the audit.
- Over-assessment: In some cases, the audit may reveal that your tax liability was overestimated. This could result in a reduction in your tax debt, possibly leading to a refund or adjustment to your tax records.
Pro Tip
If you receive IRS Letter 950C, consult a tax professional before taking any action. A tax attorney or CPA with audit experience can help you understand the letter and guide you on the best course of action.
How Letter 950C differs from other IRS notices
Unlike other IRS notices that may inform you of simple account adjustments or payment reminders, Letter 950C provides a comprehensive audit result. The letter includes:
- Specific findings from the audit
- Explanation of proposed changes to your tax liability
- An enclosed agreement form that you can sign if you accept the findings
- A description of the appeals process, should you wish to dispute the IRS’s conclusions
Pro Tip
When preparing to appeal, gather all relevant financial records and documentation that support your case. Accurate and organized documents strengthen your position and help clarify your appeal to the IRS.
What should you do when you receive IRS Letter 950C?
Upon receiving IRS Letter 950C, the first step is to read through the notice carefully to understand what the IRS is proposing. Here are the key actions to take:
- Review the audit results: Make sure you fully understand the changes the IRS is proposing. This includes carefully examining the calculations, discrepancies, or any errors the IRS has noted.
- Consult with a tax professional: Since Letter 950C can have significant financial implications, consulting a tax attorney or CPA who specializes in IRS audits can be beneficial. They can help you assess the IRS’s findings and decide on the best course of action.
- Consider your options: You can choose to either agree with the findings or file an appeal if you believe the IRS’s findings are incorrect. Filing an appeal requires submitting a formal request within the 30-day window.
Options available if you agree with the IRS findings
Signing the agreement form
If you agree with the IRS’s conclusions, you can sign and return the agreement form included with Letter 950C. By signing the form, you accept the proposed changes to your tax liability, and no further action is necessary. Once signed, the IRS will proceed with adjusting your tax account to reflect the audit findings.
Payment options for outstanding balance
Should the audit result in a deficiency, you may owe additional taxes. The IRS provides multiple payment options, including:
- One-time payment: Pay the full amount owed to avoid further interest and penalties.
- Installment agreement: Request a payment plan to settle the tax debt in monthly installments. This can be helpful if paying the entire balance at once is not feasible.
What to do if you disagree with the audit findings
Filing an appeal within the 30-day timeframe
If you disagree with the IRS’s assessment, you have the option to file an appeal. This must be done within 30 days of receiving Letter 950C to ensure your appeal is accepted. Here are the steps to follow:
- Review your tax records: Begin by re-evaluating the financial information and documents the IRS audited. Look for any discrepancies or supporting evidence that could bolster your appeal.
- Prepare a written protest: A written protest is required to formally appeal. This document should include specific reasons why you disagree with the IRS’s findings, supported by relevant tax codes or regulations.
- Contact a tax advisor: Working with a tax attorney or enrolled agent can be beneficial. They can help you draft a persuasive protest letter and navigate the appeals process.
Pro Tip
Respond within the 30-day deadline stated in IRS Letter 950C to retain your right to appeal. Missing this deadline may lead to immediate enforcement actions, such as additional penalties or collections.
How to respond to IRS Letter 950C
Responding to IRS Letter 950C depends on whether you agree or disagree with the proposed changes. Regardless of your decision, it’s important to respond promptly to avoid complications, such as losing your right to appeal or incurring additional penalties.
Steps to take if you decide to appeal
Appealing the IRS’s findings involves a series of steps, including gathering evidence, preparing a written protest, and possibly attending an appeals conference. Here’s a breakdown of the process:
- Gather supporting documentation: Collect records, receipts, and any other financial documents that may counter the IRS’s findings.
- Write a formal protest letter: Your protest letter should explain in detail why you disagree with the audit results, citing tax laws or documentation that support your position.
- Submit the protest to the IRS: Once complete, submit your protest to the IRS as outlined in Letter 950C, ensuring you meet the 30-day deadline.
- Attend an appeals conference: If requested, be prepared to attend a meeting with an appeals officer. They will review your case and help determine whether adjustments to the audit findings are warranted.
Seeking professional assistance
Since IRS audits can be complex and financially impactful, consulting a qualified tax professional can help you navigate the appeals process and avoid common mistakes. Professionals like CPAs, enrolled agents, or tax attorneys have specialized knowledge and can assist with every aspect of responding to IRS Letter 950C.
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Frequently asked questions
What is the difference between IRS Letter 950C and a 90-day letter?
IRS Letter 950C, often referred to as a “30-day letter,” gives taxpayers 30 days to agree with or appeal the IRS’s proposed adjustments after an audit. This letter is sent to provide taxpayers with an opportunity to address findings without immediate enforcement action. In contrast, a 90-day letter, or Notice of Deficiency, is a final notice from the IRS giving the taxpayer 90 days to either pay the amount due or petition the U.S. Tax Court. Failing to respond to a 90-day letter could result in enforced collection actions by the IRS.
Can I request an extension on the 30-day deadline in IRS Letter 950C?
While the 30-day period is typically firm, you may be able to request a short extension if you provide a valid reason, such as needing more time to consult with a tax professional. Contact the IRS directly to explain your situation and ask if an extension is possible. It’s best to initiate this request as early as possible to avoid missing the deadline, as failure to respond within the specified timeframe could limit your options to appeal the audit findings.
What documents should I prepare if I want to appeal IRS Letter 950C?
If you plan to appeal, you’ll need to gather all relevant financial records, receipts, and tax documentation that support your case. Additionally, you must write a formal protest letter outlining your reasons for disputing the audit findings, citing any applicable tax laws or codes. This letter should be detailed and specific, addressing each point of disagreement. Working with a tax professional can help ensure your appeal includes the necessary documentation and arguments to strengthen your case.
What are the possible outcomes if I appeal the findings in IRS Letter 950C?
If you appeal, there are several possible outcomes. The IRS may adjust its findings in your favor if you provide sufficient evidence to dispute the proposed deficiency. Alternatively, the IRS could uphold its original assessment, in which case you may still owe the amount stated in the letter. In some cases, the IRS may negotiate a reduced liability or set up an installment plan if the deficiency is upheld but paying in full is challenging.
What are the consequences if I ignore IRS Letter 950C?
Ignoring IRS Letter 950C can have serious consequences. If you don’t respond, you forfeit the right to appeal the audit findings, and the IRS may proceed with the proposed changes to your tax liability. This could lead to enforced collection actions, such as wage garnishment or bank levies, to recover the unpaid amount. It’s crucial to respond within the 30-day window to avoid additional penalties, interest, and collection actions.
Need help understanding other IRS letters and notices? Visit our comprehensive guide to IRS Letters and Notices or search for the document you received in the table below.
| CP01 | The IRS verified your claim of identity theft and will monitor your account. |
| CP01H | The IRS received a tax return with a social security number that belongs to a dead person. |
| CP02H | Money is due on an amended return based on a grant received due to Hurricane Katrina, Rita, or Wilma. |
| CP03C | You received the First-Time Homebuyer Credit for a house you purchased. |
| CP04 | You may be eligible for tax deferment because either you or a spouse served in a combat zone, a qualified contingency operation, or a hazardous duty station during the tax year specified on your notice. |
| CP08 | You may be entitled to additional money due to the Additional Child Tax Credit. |
| CP10 | Your tax return changed due to a miscalculation, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP10A | Your tax return changed due to a miscalculation of the Earned Income Credit, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP11 | You owe money because the IRS amended your return due to a miscalculation. |
| CP11A | Your tax return changed due to a miscalculation of the Earned Income Credit, and the refund you wanted to apply to an estimated tax payment also changed. |
| CP11M | Your tax return changed due to a miscalculation of the Making Work Pay and Government Retiree Credit, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP12 | You are due a bigger refund because the IRS corrected one or more mistakes on your tax return. |
| CP12A | The IRS made changes to correct the Earned Income Credit (EIC) claimed on your tax return. |
| CP12E or CP12F | The IRS corrected a miscalculation on your return. |
| CP12M | The IRS made changes to the computation of the Making Work Pay and/or Government Retiree Credits on your return. |
| CP12R | The IRS made changes to the computation of the Rebate Recovery Credit on your return. |
| CP13 | The IRS made changes to your return due to a miscalculation. There is no refund or amount due. Your balance is zero. |
| CP13A | The IRS made changes to your return due to a miscalculation of the Earned Income Credit. There is no refund or amount due. Your balance is zero. |
| CP13M | The IRS made changes to your return due to a miscalculation of the Making Work Pay credit or the Government Retiree Credit. There is no refund or amount due. Your balance is zero. |
| CP13R | The IRS made changes to your return due to a miscalculation of the Recovery Rebate Credit. There is no refund or amount due. Your balance is zero. |
| CP14 | You owe money on unpaid taxes. |
| CP16 | The IRS made changes to your return due to a miscalculation. The refund you were due was applied to other tax debts. |
| CP21A | You owe money due to the changes you requested that the IRS make on your tax returns. |
| CP21B | You are due a refund due to the changes you requested that the IRS make on your tax returns. The money should arrive within 2 to 3 weeks. |
| CP21C | The IRS made the requested changes to your tax return. You will not receive a refund, and there is no tax due. Your balance is zero. |
| CP21E | As a result of your recent audit, the IRS made changes to your tax return, and you owe money as a result of those changes. |
| CP21I | The IRS made changes to your tax return relating to the Individual Retirement Arrangement (IRA) taxes. You owe money due to the changes. |
| CP22A | The IRS made the changes you requested, and you owe money as a result. |
| CP22E | As a result of your recent audit, the IRS changed your tax return, and you now owe money. |
| CP22I | The IRS made changes to your tax return relating to the Individual Retirement Arrangement (IRA) taxes. You owe money due to the changes. |
| CP23 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. You owe taxes due to these changes. |
| CP24 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. This resulted in an overpayment of estimated taxes. |
| CP24E | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. This resulted in an overpayment of estimated taxes. |
| CP25 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. You are not due a refund, nor do you owe any money. Your balance is zero. |
| CP31 | You need to update your address because your refund check was returned to the IRS. |
| CP45 | The IRS was unable to apply your overpayment to your estimated tax as you requested. |
| CP49 | The IRS used all or part of your refund to pay a tax debt. |
| CP53 | Your refund check will be sent by mail because the IRS can’t provide your refund through direct deposit. |
| CP57 | The bank declined your payment, so the IRS was unable to draft funds from your bank account. |
| CP71 | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71A | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71C | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71D | A reminder of the amount you owe in tax, penalty, and interest. |
| CP88 | The IRS is holding your refund because you haven't filed one or more tax returns, and it believes you will owe tax. |
| CP90 | The IRS is notifying you of its intent to levy certain assets for unpaid taxes. You have the right to dispute the levy in a Collection Due Process hearing. |
| CP91 | The IRS will levy up to 15% of your social security benefits for unpaid taxes. |
| CP120 | The IRS needs documentation of your tax-exempt status. |
| CP120A | Your organization’s tax-exempt status has been revoked because it failed to file a Form 990 series return for three consecutive years. |
| CP130 | You may no longer need to pay the Alternative Minimum Tax (AMT) because your tax return filing requirements changed. |
| CP152 | The IRS received your return. |
| CP153 | The IRS will send your refund by mail because your direct deposit did not go through. |
| CP161 | You have an unpaid balance due to the IRS. |
| CP166 | Your monthly payment to the IRS did not go through due to insufficient funds in your bank account. |
| CP178 | You may no longer owe excise tax because your tax return filing requirements changed. |
| CP231 | You need to update your address because your refund was returned to the IRS. |
| CP259 | You did not file the business tax return identified in the notice. |
| CP259A | You should have filed these forms but did not – Form 990/990-EZ, Return of Organization Exempt From Income Tax, or Form 990-N (e-Postcard). |
| CP259B | The IRS requires you to file these forms but did not – Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. |
| CP259C | The IRS believes that you are a private foundation, but did not file the required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. |
| CP259D | You must file this form, but you did not – Form 990-T, Exempt Organization Business Income Tax Return. |
| CP259E | You should have filed this form, but you did not – Form 990-N (e-Postcard) or Form 990/990-EZ, Return of Organization Exempt From Income Tax. |
| CP259F | The IRS requires you to file this form but did not – Form 5227, Split-Interest Trust Information Return. |
| CP259G | The IRS requires you to file this form, but you didn’t – Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations. |
| CP259H | As a tax-exempt political organization, you must file this form, but you did not – Form 990/990-EZ, Return of Organization Exempt From Income Tax. |
| CP276A | You submitted your tax liability schedule incorrectly. The IRS typically charges a Federal Tax Deposit (FTD) penalty for this but did not this time. |
| CP276B | The IRS did not receive the correct amount of tax deposits. It normally charges a Federal Tax Deposit (FTD) penalty but did not this time. |
| CP297 | The IRS is notifying you of its intent to levy certain assets for unpaid taxes. You have the right to dispute the levy at a Collection Due Process hearing. |
| CP297A | The IRS has levied your assets for unpaid taxes. You have the right to dispute the levy at a Collection Due Process hearing. |
| CP298 | The IRS notifying you of its intent to levy up to 15% of your social security benefits for unpaid taxes. |
| CP501 | You have a balance due on one of your tax accounts. |
| CP503 | You have an unpaid balance on one of your accounts, and the IRS has not heard from you. |
| CP504 | You have an unpaid amount due on your account. If you do not pay immediately, the IRS will levy your state income tax refund to apply it to the amount you owe. |
| CP504B | You have an unpaid amount due on your account. If you do not pay immediately, the IRS will levy certain property or rights to property to apply it to the amount you owe. |
| CP521 | A reminder that you have an installment agreement payment due. |
| CP523 | You have defaulted on your payment agreement. Therefore the IRS is terminating the agreement and will levy your assets. |
| CP601 | Usted tiene un saldo pendiente de pago (dinero que le debe al IRS) en una de sus cuentas contributivas. |
| CP603 | No hemos recibido respuesta de parte de usted y todavía tiene un saldo sin pagar en una de sus cuentas contributivas. |
| CP604 | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará cualquier reembolso de impuestos estatales al que tenga derecho y aplicarlo al pago de su deuda. |
| CP604B | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará ciertas propiedades o derechos de propiedad y lo aplicará al pago de su deuda. |
| CP621 | Este aviso es para notificarle que usted tiene un plan de pagos a plazos vencido. Por favor, envíe el pago inmediatamente. |
| CP623 | Este aviso es para informarle nuestra intención de cancelar su plan de pagos a plazos y confiscar (embargar) sus bienes. Usted incumplió en su acuerdo. |
| CP711 | Nosotros realizamos cambios a su planilla debido a que entendemos que hubo un cálculo erróneo. Como resultado de estos cambios, usted adeuda dinero por sus contribuciones. |
| CP721 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. |
| CP722 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. |
| CP771 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP772 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP773 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP774 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP959 | Usted no radicó su planilla de contribución de negocios identificada en este aviso. |
| CP2000 | The income or payment information on file doesn’t match your tax return. The discrepancy may result in an increase or decrease in your tax due. |
| CP3219A | The IRS has received information that is different from what you reported on your tax return. This may result in an increase or decrease in your tax. |
| CP3219N | The IRS didn’t receive your tax return, so it calculated your return based on the information received from employers, financial institutions, and others. If you want to challenge the proposed tax, you have 90 days from the date of this notice. If you are outside the country, you have 150 days. |
| Letter 0012C | The IRS needs additional information to process your tax return. |
| Letter 0484C | The IRS wants a completed |
| Letter 0525 | Updates you on proposed changes after an IRS examination. Any changes are explained and details the refund due or taxes owed. |
| Letter 531 | IRS Notice of Deficiency. The information the IRS received about you was different from what you reported on your return. |
| Letter 0668D(LP 68) | The IRS released their levy. |
| Letter 0549C | Your tax bill was paid. |
| Letter 0681C | The IRS accepted your payment proposal. However, this is not a formal Installment Agreement. |
| Letter 0757C | You did not adhere to the terms of your Installment Agreement. |
| Letter LT 11 | The IRS plans to seize your property or rights to property. |
| Letter 1058 | The IRS has not received your payment. It plans to seize your property or rights to property. |
| Letter 1615 (LT 18) | You must respond to the IRS within 10 days of this notice regarding past due tax returns. |
| Letter 1737 (LT 27) | Complete and sign Form 433F, Collection Information Statement. |
| Letter 1961C | Your application for a Direct Debit Installment Agreement was declined. It explains why and what you need to do to qualify. |
| Letter 1962C | Your application for a |
| Letter 2050 (LT 16) | The IRS is trying to collect unpaid taxes from you from returns that have been filed or from returns that have not been filed. |
| Letter 2257C | The IRS is providing the payoff amount that you requested. |
| Letter 226-J | An IRS letter to large employers notifying them that they may be liable for an Employer Shared Responsibility Payment (ESRP). |
| Letter 2271C | A request for an Installment Agreement has been approved. It explains the fees and how to qualify for a Low Income Fee Reduction. The letter may also request missing information. |
| Letter 2272C | An IRS letter explaining why your request to pay the balance due in installments was declined. |
| Letter 2273C | A confirmation letter of your request to pay the balance due in installments. It contained the amount to pay, fees charged, and where to send payment. Instructions on how to apply for the Low Income Fee Reduction included. |
| Letter 2318C | A response to a request to pay taxes due to payroll deductions. It also explains the fees that are charged. |
| Letter 2357C | The IRS is admitting that it did not send you the balance due notices that it should have. |
| Letter 2603C | The IRS accepted your installment agreement. The IRS will file a Notice of Federal Tax Lien on your personal property. |
| Letter 2604C | The IRS has accepted your request for installment payments. This IRS letter provides the monthly payment, the address where to send it, and the fees charged. The letter also provides instructions on how to apply for the Low Income Fee Reduction. |
| Letter 2761C | The IRS is requesting your combat zone service dates to ensure that it provides you with the special provisions and protection of the combat zone deferment. Copies of military orders or other documentation to support your time served may be requested. Civilians working in support of the Armed Forces may be required to provide a Letter of Authorization or a letter from their employer. |
| Letter 2789C | An annual reminder notice, as required by law, of the balance due to the IRS. It explains that penalties and interest continue to accrue until the balance is fully paid. |
| Letter 2840C | Confirms your Installment Agreement request and includes the payment amount and due date. This IRS letter explains the fees charged for paying monthly and explains how to apply for the Low Income Fee Reduction (if you qualify). |
| Letter 3030C | Provides an explanation of the tax, penalty, and interest still due on your account. |
| Letter 3127C | A confirmation of your request to make a change to your Installment Agreement. This IRS letter explains the fees for the change. Changes can be to the payment amount or due date, or it can include additional liabilities. |
| Letter 3174 | A reminder of taxes due after the IRS has sent a Notice of Intent to Levy. |
| Letter 3217C | The IRS has accepted your request to pay the balance in installments. This IRS letter provides your payment amount, the due date, and fees charged. The letter also provides instructions on applying for the Low Income Fee Reduction (if you qualify). |
| Letter 3228 (LT 39) | A request to pay the balance due within 10 days using the envelope provided. |
| Letter 3500 | The IRS has received your documents, and it needs additional time to review them. |
| Letter 3572 | Your Federal Income Tax Return has been selected for examination. The IRS auditor requests that you call to schedule an audit appointment. |
| Letter 4883C | The IRS received your federal income tax return but needs more information to verify your identity in order to process your tax return accurately. |
| Letter 4903 (LT 26) | You must file your tax returns immediately. The IRS has previously contacted you, but it did not receive a response. |
| Letter LP 47 | The IRS is trying to locate the person identified in the letter and is requesting that you provide their new address. |
| Letter LP 59 | The IRS has not received a response to the notice of levy it previously sent. |
| Audit Letter 2205 | The IRS manages audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or the taxpayer’s home, place of business, or accountant’s office (field audit). |
| Letter 915 | You recently underwent an audit, and the IRS informs you that you now owe taxes. |
Key takeaways
- IRS Letter 950C notifies taxpayers of proposed changes to tax liability following an audit.
- If you agree with the findings, you can sign the enclosed agreement form to accept the changes.
- Disagreeing with the findings gives you the right to appeal within 30 days.
- Consulting a tax professional can provide valuable support when responding to IRS Letter 950C.
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