Letter 6122C: How to Handle the Notice and Gift Tax Issues

Last updated 11/11/2024 by

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Summary:

Letter 6122C is issued by the IRS to notify taxpayers of an underpayment or penalty related to gift tax filings. It often highlights missed or late filings on lifetime gifts and outlines the penalties and actions required to resolve outstanding dues or provide additional documentation.

Receiving an unexpected letter from the IRS can be concerning, especially if it addresses complex tax matters like gift tax. Letter 6122C informs taxpayers of an underpayment or issues with a gift tax filing, particularly when large lifetime gifts are involved. This guide will walk you through the purpose of Letter 6122C, the steps you need to take upon receiving it, and how to address potential penalties to avoid further complications.

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What is IRS letter 6122C?

Overview of letter 6122C

The IRS issues Letter 6122C as a formal notice regarding underpayment or discrepancies related to the gift tax. This letter typically relates to instances where taxpayers have made significant gifts during their lifetime and have failed to report these properly on a gift tax return. The IRS issues this letter to inform taxpayers of penalties, interest charges, or required additional documentation to correct any discrepancies in their tax filings.

What triggers IRS letter 6122C?

Gift tax obligations arise when an individual gifts a substantial asset or amount exceeding the annual gift tax exclusion limit, which is updated each year. If you’ve gifted assets over this threshold without properly filing Form 709 (the United States Gift Tax Return), you may receive Letter 6122C. The IRS flags these situations for potential underpayment or late filing, as accurate gift reporting ensures compliance with federal tax laws.

Pro Tip

Set up IRS account alerts online to get real-time notifications on any changes to your tax return or account. This helps you stay updated on adjustments and due dates.

Why did I receive IRS letter 6122C?

Gift tax underpayment and reporting errors

You may receive Letter 6122C if you neglected to report a gift, underreported its value, or missed filing deadlines. In cases involving large, lifetime gifts, the IRS may issue this letter to inform you of potential underpayment or filing omissions. Failure to report gift taxes accurately can result in penalties, which the IRS outlines in this notice. These penalties may include fines for late payment, interest charges, or additional penalties based on the time elapsed since the gift was made.

Ensuring proper documentation and supporting records

The IRS requires documentation to support your gift tax filings, especially for assets with complex valuations, such as real estate, stocks, or business interests. If you lack sufficient records, Letter 6122C may prompt you to gather and submit evidence of your gift’s value, such as appraisals or transfer documents, to ensure the correct tax is calculated.

Pro Tip

Keep thorough records of all gifts given, especially large gifts, including receipts, appraisals, and transfer documents. This documentation can support your case if you need to verify gift values with the IRS.

What should you do when you receive letter 6122C?

Upon receiving Letter 6122C, here are the recommended steps:

Review the notice carefully to understand the specifics of the underpayment or late filing penalty.
Gather any required documentation, such as prior tax filings, proof of gift value, and correspondence related to the gift.
Consult IRS Form 709 to ensure your previous filings align with IRS requirements for reporting gifts.
Respond promptly by following any instructions within the letter for submitting payment, documents, or additional information.
Consider consulting a tax professional if the letter includes complex valuation or penalty issues.

How to respond to IRS letter 6122C

Steps to take when responding to the notice

Follow these steps when responding to Letter 6122C:

1. Read and understand the letter’s details, including any underpayment or specific penalty outlined.
2. Prepare the necessary documents, such as appraisals or valuation reports for gifted assets, that substantiate your reported gift values.
3. File Form 709, if required, to report any previously unreported gifts and ensure the IRS has accurate records of your lifetime gifting activities.
4. Mail your response to the IRS, including a copy of the letter, a cover letter explaining any discrepancies, and any documentation that supports your filing or resolves the issue.

Alternative ways to handle IRS letter 6122C

In addition to mailing a response, consider these options:

– Phone consultation: If your letter contains an IRS contact number, you can call to discuss your case and potentially expedite the resolution.
– Taxpayer Advocate Service (TAS): If you face unique or challenging circumstances, reaching out to TAS may help resolve your issue with minimal delay.

Additional support for handling IRS letter 6122C

If you’re uncertain about how to proceed, the following resources can help:

Contact a Certified Public Accountant (CPA) who specializes in estate and gift tax matters for expert guidance.
Visit the IRS website for details on gift tax regulations and Form 709 filing instructions.
Reach out to the Taxpayer Advocate Service if you face significant obstacles in responding to the notice.

Professional assistance can be particularly beneficial if the matter involves complex asset valuation or if multiple penalties apply.

Pro Tip

Consult a tax professional if you receive IRS Letter 6122C to ensure accurate filing and compliance with gift tax laws. Their expertise can help avoid future penalties and reduce confusion.

Potential penalties or consequences if you don’t respond

Failure to respond to Letter 6122C can result in serious penalties, including:

Accrued interest and penalties on any outstanding gift tax amount.
Additional enforcement actions: Prolonged non-compliance may lead to wage garnishments, liens, or asset levies.
Future gift reporting complications: Unresolved issues can affect your compliance status with future gift tax obligations.

Responding quickly helps mitigate these risks and prevents long-term tax issues.

Possible outcomes after responding to IRS letter 6122C

After responding to Letter 6122C, the IRS may take one of the following actions:

Resolution through additional documentation: If you provide accurate records and payment, the IRS may clear any penalties and close the case.
Request for further clarification: The IRS may ask for additional details if there’s an unresolved discrepancy in your documentation.
Approval for a payment plan: If you owe taxes, the IRS may allow installment payments to settle the balance.

Prompt action typically leads to a smoother resolution and minimizes the risk of escalated penalties.

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Frequently asked questions

What should I do if I disagree with the information in IRS letter 6122C?

If you believe the information or the penalty indicated in Letter 6122C is incorrect, you can dispute it. First, review the details carefully, and gather any supporting documents, such as appraisals or proof of timely gift tax filing. Then, write a formal response explaining why you disagree and include any evidence that supports your position. Mail this response, along with a copy of the letter, to the IRS address provided on Letter 6122C. Consider consulting a tax professional if you’re unsure of the best approach to dispute the letter.

Is there a deadline for responding to IRS letter 6122C?

Yes, Letter 6122C will specify a deadline by which you need to respond. It’s crucial to meet this deadline to avoid further penalties or interest charges. Typically, the IRS requests a response within 30 days from the date of the letter. Acting within the timeframe helps ensure you avoid additional penalties and makes it more likely the issue will be resolved efficiently. If you need more time, contact the IRS to see if an extension is possible.

Can I negotiate or set up a payment plan if I owe additional gift tax?

Yes, if you owe additional tax due to an underpayment of gift tax, you may be eligible for a payment plan with the IRS. Contact the IRS to discuss available options, such as an installment agreement, which allows you to pay your owed taxes over time. Setting up a payment plan can help you manage the debt while avoiding more severe penalties. Be sure to initiate this request as soon as possible if you’re unable to pay the full amount at once.

What types of gifts require filing a gift tax return?

The IRS requires taxpayers to file a gift tax return (Form 709) for certain gifts that exceed the annual exclusion limit, which is $16,000 per recipient as of 2022. Gifts that count toward this limit include cash, property, stocks, and other tangible assets. If you gave any individual assets exceeding this value in a single year, you need to report it, even if no tax is due. This includes gifts of real estate or shares that have significant value, so it’s essential to understand the types of gifts that could trigger the need for reporting to avoid future issues.

How can I avoid receiving IRS letter 6122C in the future?

To avoid receiving IRS Letter 6122C in the future, ensure that all large gifts are properly documented and reported using Form 709. Review your annual gift-giving amounts against the IRS’s annual exclusion limit to see if any filings are required. Maintain thorough records of all significant gifts, appraisals, and correspondence, especially for complex assets like real estate or stocks. Consulting a tax advisor before making large gifts can also help you stay compliant with gift tax requirements and avoid unexpected penalties.

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.

IRS Letter or Notice Number

Notice Description

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 6122C addresses underpayment or missed reporting on gift tax filings, especially for large gifts.
Responding promptly with accurate documentation can help resolve the issue and avoid penalties.
Seek professional help if you encounter complexities in gift valuation or IRS requirements.
Ignoring the letter can result in interest, penalties, and enforcement actions like liens or garnishments.

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