What is an IRS Notice?

An IRS notice is official communication regarding tax-related updates, required corrections, or requests for documentation. Receiving a notice does not necessarily mean your business is being audited; often, the IRS simply requires more information to process a filing or update your account status.

Things to know

• 7shifts Payroll helps you maintain compliance by automating tax calculations and filing federal, state, and local forms.
• Every notice includes a specific reference number (such as CP136 or CP2100) to help identify the underlying issue.
• Deadlines for responding to the IRS are time-sensitive; ignoring these can lead to penalties or interest.

Common reasons for IRS notices

The IRS issues notices when there is a mismatch between your reported data and their records, or when specific account actions occur.

• Errors in calculations or missing details on a tax return.
• Unpaid federal tax balances or missed payroll tax deposits.
• Discrepancies between the wages you reported and the tax payments received by the IRS.
• Changes or corrections made by the IRS to a previously calculated refund.
• The need to verify a business owner's identity before processing a filing.

Action plan for receiving a notice

If you receive a letter from the IRS, follow these steps to resolve the matter efficiently.

1. Review the entire letter to identify the specific issue and the deadline for your response.
2. Cross-reference the notice with your 7shifts Payroll reports to verify the accuracy of the IRS claim.
3. Provide any requested information or payments exactly as outlined in the notice instructions.
4. Keep a copy of the notice and any response you send for your internal business records.
5. Contact 7shifts Support if the notice is related to payroll taxes processed through 7shifts Payroll so our team can assist with the review.

Common employer-related notices

These are frequent notices that businesses encounter regarding employment and payroll compliance.

• CP136: An annual notice regarding your federal tax deposit requirements.
• CP14: An initial balance due notice issues when taxes are owed and unpaid after a return is processes.
• CP141: A notice regarding penalties for late payroll tax deposits.
• CP2100: Notification of a mismatch in a Taxpayer Identification Number (TIN).
• CP504: A final notice regarding unpaid taxes before collection actions begin.
• Letter 226J: Correspondence regarding Employer Shared Responsibility Payments under the ACA.

Reducing tax compliance risks

Following these best practices can help minimize the likelihood of receiving an IRS notice for your business.

• Ensure all federal payroll tax deposits are submitted on time.
• Audit employee profiles regularly to ensure names and Social Security numbers are accurate.
• File Form 941 (Quarterly) and Form 940 (Annually) correctly and by their respective deadlines.
• Utilize 7shifts Payroll reporting to monitor your tax filing status throughout the year.