Have you received a CP2501 IRS notice in the mail, and you aren’t sure of what to do next? Does the document contain information that does not align with your records?
Is the IRS correct about how much you owe them? If so, do you know what next steps to take to remedy the solution?
Many Americans file their tax returns electronically, leaving room for some minor errors if they don’t look over the information input onto the return. When this happens, the IRS sends out a CP2501 IRS notice to let you know that your report had some inconsistencies.Â
You came to the right place if you recently received this letter and need further guidance on responding appropriately. This brief CP2501 IRS notice guide, like our CP504b guide, will cover what you need to know about this letter and who you can contact for more information.
What Is a CP2501 IRS Notice?
A CP2501 notice is a letter from the IRS that questions your payment or income information you reported to them. You may have income that you did not claim or other credits that the IRS needs to review that can possibly increase or decrease your return.
Sometimes, you may just have to acknowledge the change. Other times, you may have to provide them with an explanation. It is important to note that the CP2501 IRS notice is not a bill. The IRS most likely needs more information from you.
What Triggers the CP2501 IRS Notice?
Sometimes we forget to add information about income or credits received from a job or other entity. Even if we forget, the entity that provided you with those credits or income did not. They, too, had to report the money they provided to you to the IRS, so the IRS is just looking to confirm if that information is accurate or not.
It can take several months for the Internal Revenue System to reach out to you about a discrepancy, especially if several different entities report information that relates to you.
What to Do about My CP2501 IRS Notice
First and foremost, take a few deep breaths if you are panicking or concerned about this notice. As mentioned earlier, this notice is only a notice, not a bill, audit, or penalty from the IRS. Once you are calm, please take a look over the notice and read it carefully.
The IRS should explain the difference between what they have and what you reported on your previous return. They also include instructions on the next steps on how to solve the problem.
If you have a copy of your file return on hand, compare it to the CP2501 IRS notice to see what discrepancies there are. If you don’t have one, you can always order a transcript of your original return. At this point, you can make your decision to either agree, partially agree or disagree with what the IRS claims.Â
Response Timeframe
No matter if you agree or disagree, you must let the IRS know where you stand on the manner within sixty days. If you don’t respond within that timeframe, there is a chance that the warning could become a penalty or an unnecessary bill. This also puts you at a higher event of an audit.
Different CP2501 IRS Notice Response
Once you’ve decided on what response you want to give to the IRS, make sure you respond within your timeframe. It is recommended that if and when you mail in your responses, make sure that they are via certified mail. In the event that your documents get lost, you at least have a tangible record that proves you submitted your response within the two-month timeframe.
I Agree with the CP2501 IRS Notice
If you agree with the IRS communication that you did make a mistake, you can sign the appropriate box and revolve the issue with a money order or a check to cover what you owe. If you don’t have the money immediately to pay for what you owe, you can apply for an IRS payment plan. This process can quickly become confusing, so you may want to reach out to a few qualified tax attorneys to help you sort through your options.
I Partially Agree or Don’t Agree with the CP2501 IRS Notice
The response for partially agreeing or not agreeing with the notice is relatively similar to each other. If you plan on providing this as a response, you should consider getting help from experienced tax attorneys. They will assess your IRS notice and help you draft a response to the IRS that they will most likely agree with more than they would if you sent a response on your own.
If you would like to, you also have the option to call the IRS yourself to try to rectify the issue. It is important to note that the conversation will most likely not go in your favor unless you have substantial preparation before you call.
Gather Your Documents
Along with your response, you will want to attach any documents that support your position in the matter. For example, you can send in a 1099 or a W2.
Other documents to gather:
- tax forms from clients
- Bank statements
- Other income sources
As with most arguments, the more evidence you have, the better your chance of getting the other side to agree with you. Ensure that you include every income source on your return, regardless of how it was paid to you.
Identity Theft
There is a chance that someone could have stolen your identity, which would cause discrepancies in your tax return. If you suspect that someone may have used your identity, you should take a look at the Internal Revenue Service’s guidance for this type of event.
Should I Hire a Tax Attorney?
Technically, you don’t have to hire an attorney to respond to your CP2501 IRS notice. You can answer the IRS on your own, especially if you agree with what is on the notice.
If you disagree with what is on the notice, you may want to reach out to an attorney. Most qualified tax attorneys provide their clients with free consultations before taking on your case and asking for payment.
Roles and Responsibilities of a Tax Attorney
Tax attorneys have the ability to explain complicated tax laws in a way that you can best understand. They also can help provide you with tax relief, settle disputes with the Internal Revenue Service, and prepare tax-related documents on your behalf. Tax attorneys are part of accounting firms, work independently, or are a part of a legal firm.
What to Look For in a Tax Attorney
The quality of service offered by tax attorneys varies considerably. One attorney may be a better fit for you than another, so make sure you do your research before partnering with anyone.
Law License
In order for an attorney to practice law in the state they reside in, they must have an active license. You can check for their license by visiting your state’s bar association website.
Client Testimonials
To help you gauge the attorney’s services’ quality, you can look at their online reviews. Make sure that you don’t only focus on the reviews on the attorney’s website. Check out other third-party websites such as Google or the Better Business Bureau.
Depending on the attorney, they may also have a Yelp page where clients can talk about their experiences. The only way to know if the attorney is a good fit is to meet them in person. Be sure to ask your potential attorney if they offer free consultations.
Experience and Qualifications
All experienced tax attorneys have a law degree. To find the right attorney, look to see if they have experience in taxation in addition to a CPA license.
PTIN
The IRS requires all tax preparers and attorneys to have a Preparer Tax Identification Number, also known as a PTIN. This helps the IRS identify who helped prepare your paperwork and who submitted the documents on your behalf. If you work with an attorney to work with your CP2501 IRS notice, make sure they input their PTIN information.
Tax Attorney Cost
Attorneys each have the ability to set their own prices for what they believe is fair. Some charge between $200 to $400 per hour, and the more experienced attorneys charge more per hour.
How much you have to spend will depend on your case’s complexity. There are some attorneys who work based on a contingency fee and others who work pro-bono.
CPA vs. Tax Attorney
CPAs (Certified Public Accountants) and tax attorneys handle different types of tax matters, but they have a significant distinction between them. A tax attorney is a lawyer who went to law school, passed the bar, and has the qualification to litigate on several different legal matters.
On the other hand, A CPA is an accounting professional with some sort of finance or business degree and a CPA designation. In order to earn the designation, the CPA must pass all of their CPA exams.
They have the qualifications to manage bookkeeping, tax preparation, auditing, and other financial duties. Most people hire attorneys when they have complex tax issues, whereas a CPA is hired to prepare tax returns and financial records.
How to Prevent Getting a CP2501 IRS Notice
Before you file your next tax return, there are a few things you should keep in mind to avoid receiving this CP2501 IRS notice again. For example, you should keep a detailed record of all your tax forms and sources of income.
In the event that the IRS requests copies of those items, you will have them readily on hand. Accurate record-keeping also ensures that you report everything correctly the first time around.
Wait Until You Have All Your Documents
When tax time comes around, many Americans are adamant about sending in their returns as soon as possible so they can get them out of the way. Ensure that you have all of your income documents and tax forms from clients and employers on hand before you file. If you don’t, you risk receiving a CP2501 IRS notice.
Include All of Your Income
It is imperative that you report all of the income you earned each year so that you avoid receiving another CP2501 IRS notice. No matter where the money came from, you must report it because someone else may report it on your behalf, triggering the IRS to send out this letter.
Make Sure Your Forms Are Correct
Before you file your document, double-check to ensure everything is accurate. Compare your filing document to your own record to ensure complete accuracy. If you are unsure, you should reach out to a tax professional to review.
File an Amended Return
If you need to, you can file an amended tax return if there is information you did leave off. This way, your final return record will be accurate.
File Electronically
It is easier to review your information input on your tax return if you file online. This can help you avoid mistakes or help you find any errors when you re-review the document. You may also find credits or deductions you may not have previously been aware of when you file online.
File Your CP2501 IRS Notice Response with Ease
Receiving any form of correspondence from the Internal Revenue System can be a scary experience, especially if you aren’t sure of what to do about it. Although the CP2501 IRS notice is not a bill or an audit, it is still an important document you must respond to.
Contact us if you’ve received a CP2501 IRS notice in the mail and would like a reputable attorney to walk you through the process. We can walk you through the process and provide you with the best option for your current solution.
