IRS Notice CP22E: Audit Examination Adjustment – Balance Due
What is IRS Notice CP22E?
An IRS notice CP22E is a result of a recent audit on your tax return and it states both that you owe a balance and the value of said balance. The IRS is saying ‘we audited you, made changes to your return, and now you owe us.’ At first glance, this can seem ominous. After all, the main point of doing taxes correctly is to avoid being audited and ensuring you are paying or receiving the correct amount.
However, if you cannot pay the balance upfront, know that there are alternatives. If you think the information provided to be incorrect, you can legally dispute the notice. And, if you are looking for tax audit help, there are plenty of avenues available. Understanding your CP22E might take a bit of research but it should not be a difficult process.
What Should I Do?
As with any IRS notice, it is imperative that it does not go unanswered. Being that this notice is generated by result of an audit, this phenomenon is evermore apparent. The steps you must take to handle the audit adjustment go as follows:
Read the Notice Carefully
We can assume that you were aware of the audit—being that an audit notice should have preceded the CP22E. Although, at times, this is not the case. But now that the process has finalized, and the IRS has decided on an outstanding balance, you must read the document carefully to ensure no mistakes were made on their end. Just because it is an audit does not mean the IRS is foolproof.
Once you have read through the notice and evaluated the information, you can then decide whether what they are proposing is correct.
Do You Agree?
If you happen to agree with the notice, then you must pay it within the timeframe provided (usually is this is 21 days). This can be done via money order, check, or (in some cases) online. Once the payment is sent and you have agreed, in writing, to the ‘proposal,’ the case is closed. If you happen to be in a situation where you agree with the notice but do not have the funds to settle the matter, then you can inquire about an IRS payment plan. Afterwards, you should:
Do You Not Agree?
If you do not agree with the information proposed, you can then request an audit reconsideration. This is best done with audit representation but can be DIY as well. An audit reconsideration should only occur if the outstanding balance has not been paid. If you’ve already paid the amount, then use Form 1040X to submit an amended US individual income tax return.
You will then need to provide (in either case) the appropriate documentation that supports your position. This could be forms like W2s, 1099s, or the likes of. Given the nature of audits, if you happen to disagree with your CP22E notice then we highly recommend hiring a tax professional. There are experts in the field that specify in tax audits.
I Need to Pay, but Can’t
If you find that you are in a position in which you know you are responsible for the amount due but cannot pay it, then look into an IRS debt settlement plan. If your balance due is below the sum of $50,000 then the process is infinitely simpler. In fact, if you are below the $50k bracket, it is often recommended that you call the number on your CP22E notice and agree upon an installment agreement with the IRS representative.
Lastly, if you cannot pay any portion of the tax, there are other tax resolution options that could, at the very least, put off the debts until you can afford to pay them. Even an ‘offer in compromise’ might help to rectify the situation and lessen the balance.
Again, for complicated IRS matters, you may want to seek the advice of a professional.
What if I Don’t Pay?
At the very least, you need to respond to the CP22E notice within the given deadline. However, if you do not pay, then your debt will accrue interest and penalties. The IRS will add these to the total value of what is owed. If the debt continues to go unpaid, the IRS can take further action resulting in liquid asset seizure, bank account seizure, and claiming your existing income.
Being that the CP22E notice is due to an already-processed audit, you cannot ignore the debts owed, or the IRS will certainly pursue the case. But if you communicate throughout the process, then the IRS will (usually) work with you towards a solution.
My Spouse Did This
If the audit was the result of information that your spouse withheld—without your consent or knowledge—then you may be qualified for innocent spouse relief. This typically occurs in marriages where one partner is trying to evade paying their full income tax. If you fall beneath this category, then you can file Form 8857, Request For Innocent Spouse Relief, within two years of the date the IRS issued the CP22E.
The IRS recognizes that this can be the fault of one party and, if that is the case, will not hold both spouses responsible. If you have more questions regarding this form, the IRS encourages you to refer to Publication 971, Innocent Spouse Relief.
Notice CP22E is simply a notice the IRS provides, after an audit, that declares you have an outstanding IRS tax balance. These notices can be generated by mistake and do not always come with an original audit warning. If you do not agree with the information, you have the right to appeal the notice.
Lastly, be sure to review the notice carefully and respond within the deadline provided. If you fail to do so, penalties and interest can accrue.
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