IRS Notice CP 2501 Return Errors

IRS Notice CP 2501 Return Errors

IRS uses Notice CP2501 to propose an adjustment to your return based on information they have from some other source. This information is not often wrong, but lacks proof to offset it. But you only have 60 days to respond.

You need to reviews the items listed on the Notice CP 2501 to determine if the items listed as missing or incorrect are in fact missed or incorrect. CP 2501’s are often wrong and the items are listed on the return. Sometimes the description of items is different enough to be picked up in the matching process.   

The CP 2501 is not a bill and nor an audit. It is a proposed adjustment due to a math error or missing items based on third party documents, supplied to the IRS.   Sometimes the information supplied to the IRS is in error.

The IRS could still audit you as a result of your response.

Be extremely careful in how you respond.  The information supplied can either make matters better or extremely worse.  You are supplying information that will be review by a Compliance Officer.  That person’s job is to verify that the information supplied resolves the outstanding issues listed on the CP 2501.  The Compliance Officer can easily make an audit referral if he or she believes the information creates more concerns than it explains.

The usual method of handling a Notice CP2501 is to either: 1) respond in writing to the IRS at the address listed on the notice, or 2) file an amended return addressing the items questioned by the IRS in the Notice CP 2501.

We typically file an amended return since that initiates a process the IRS must follow.  Letters, are often misinterpreted or lost by the IRS.  Warning- filing an amended return starts new limitations periods for audits, collections, bankruptcy, etc. So carefully weigh your options!

What is my first step?

If you received a letter or notice, a decision has to be made.  Do you feel confident to handle this situation on your own?  If it is a simple issue and you already know the answer, call or write them. If the issue is more complicated, you need to hire a Certified Tax Resolution Specialist. The IRS or State will take full advantage of your lack of knowledge and experience.

What is Your Next Step?

The next step is to determine if the notice was sent in error.  Do you have an outstanding tax liability?  Do you have unfiled or incomplete returns?

Is There a Time Limit?

Yes, each letter or notice from the IRS or State will indicate a date that you MUST to contact them by.  If you need more time, call the number on the notice or letter and request an extension.  DO NOT ALLOW the time to expire without contacting them or hiring a representative to contact them for you.

What You Don’t Want to Do!

What you don’t want to do is nothing.  Your tax problems will only get worse if you ignore them.  If you cannot pay, there are a number of potential solutions available to those who are otherwise in compliance.  In compliance means having all tax returns filed and any balances paid or on a payment plan.  If you have outstanding debts or unfiled returns, you need to get hire a Certified Tax Resolution Specialist.

Get Some Help

If you don’t know how to address the issue(s), have unfiled return/unpaid balances or just done feel confident, let the experts at Legacy Tax & Resolution Services represent you.  Work with our team of Certified Tax Resolution Specialists to resolve your issue(s) quickly.  Best of all, you don’t have to talk to the IRS or State; we can speak on your behalf.