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Good morning! Every Saturday, we open the mailbag, pour some strong coffee, and tackle the tax questions keeping America awake at 2 a.m. Here are this week’s questions:
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I got a letter from the IRS about two weeks after I filed. Is this an audit?
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Take a breath. Probably not.
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The IRS sends out millions of letters every year, and the overwhelming majority of them are not audits. They are notices — automated, impersonal, and occasionally written in a font that suggests the agency has never heard of reader-friendly design. Getting a letter two weeks after filing is actually more likely to be routine than alarming.
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What the letter probably is
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The IRS uses a numbering system for its notices. The CP and LT series cover the vast majority of what lands in mailboxes:
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CP11, CP12, CP14: math errors, adjustments, or a balance due
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CP21, CP22: changes were made to your return; here’s what shifted
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CP63: the IRS is holding your refund because you haven’t filed one or more required tax returns
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LT11 / CP90: these ones are more serious; they’re final notices before levy
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Two weeks after filing, the most common culprits are a simple math adjustment or a notice that something didn’t match the IRS’s records. Annoying, not catastrophic.
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When it actually is an audit
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Audit notices come via letter (the IRS will never call or email you about an audit, full stop). They look like CP2000 notices (underreported income) or letters from the Examination Division. They will tell you clearly what they’re examining and what they want from you.
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Read the notice carefully. Find the notice number (top right corner). Don’t ignore it. A letter that goes unanswered has a way of becoming a more serious letter. If it’s confusing or the amount seems wrong, a tax professional can help you respond correctly.
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The IRS sends a lot of mail. Most of it is just paperwork.
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I missed the deadline and didn’t file an extension. How bad is this, really?
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Honestly? It depends on whether you owed money.
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This is the part where the tax code stops treating everyone equally and splits into two very different conversations.
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If you’re owed a refund
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Genuinely good news. There is no penalty for filing late when the IRS owes you money. None. The only consequence is that your refund sits with the federal government a little longer. Which, admittedly, is its own kind of punishment. You have three years from the original due date to claim your refund before it disappears entirely.
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If you owed money
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This is where it gets less pleasant. The failure-to-file penalty is 5% of your unpaid tax per month, up to 25%. The failure-to-pay penalty runs alongside it at 0.5% per month. Both accrue from April 15 forward, and together they compound with interest.
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File now. Today, if possible. Every month you wait adds another 5% to the pile. The penalty for filing two months late is dramatically less painful than the penalty for filing six months late, and the IRS does not reward people for waiting until they feel psychologically ready.
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Can you get the penalty waived?
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Sometimes. First-time penalty abatement is a real IRS program, and if you have a clean compliance history (meaning you’ve filed and paid on time the past three years) you have a reasonable shot at getting penalties reduced or eliminated. It requires asking, though. The IRS does not volunteer this information unprompted.
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File first. Then explore abatement.
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Every Thursday, we go to work.
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The TaxStache Business Edition breaks down the tax and finance topics that actually matter for business owners, from quick intros to full deep dives. Plus book, podcast, and video recs to keep you sharp, and a weekly download you can put to use right away.
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If you own a business (or you’re building one), this one’s for you.
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Would you like to receive our Thursday Business Edition?
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Can I still contribute to my IRA for last year even though I already filed?
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Yes, and this is one of those genuinely useful tax facts that most people never hear about until it’s too late to use it.
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You had until the tax filing deadline (April 15) to make a prior-year IRA contribution, regardless of when you filed your return. If you filed in February and it’s now mid-April, you can still put money into an IRA and have it count for last year.
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The deadline is April 15, not the extension deadline. Unlike some other tax provisions, contributing to an IRA does not get extended if you file for an extension. That window closes on Tax Day whether you’ve filed or not.
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That ship has sailed for the 2025 tax year. But bookmark this for next year, because it’s one of the few legal ways to reduce your tax bill after the year has ended.
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For 2025, the IRA contribution limit was $7,000 ($8,000 if you were 50 or older). A traditional IRA contribution may be deductible depending on your income and whether you have a workplace retirement plan, which means it can directly reduce your taxable income, potentially lowering what you owe or increasing your refund.
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If you want to claim a deduction for a contribution you’re making now, you’ll likely need to amend your return with Form 1040-X to capture it.
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