IRS CP22E Notice: Changes to Your Tax Return

Mail from the IRS has a way of skyrocketing your heart rate before you even open it. When you open an IRS letter and find out that the IRS has made changes to your tax return, it’s even more alarming. If you’ve been audited and the IRS has found discrepancies in your tax return, they will send you this audit notice informing you of the changes they have made on your behalf. 

Tax issues like audits can be confusing—having a tax pro by your side can help. Use TaxCure’s tax pro listings to find help near you. 

What is the CP22E Notice, and When Does the IRS Send It?

The CP22E notice tells a taxpayer when the IRS has made changes to their tax return as the result of a recent audit. It shouldn’t come as a complete surprise, as the IRS has already notified you of their audit and requested your cooperation with their audit. The purpose of the CP22E is to notify you of what you now owe, why your owed amount has changed, and your options.

Breaking Down the CP22E Notice

Several different sections make up the CP22E notice, making it easy to get the information you need quickly. In the top corner, you’ll find the notice number, the date it was sent, your SSN, and how you can contact the IRS by phone. The body of the notice indicates the total amount you currently owe the IRS and explains that your current amount due is a result of changes made to your tax return.

Next to that paragraph, you can find a breakdown of your bill. This section includes the amount you owed prior to your audit. It includes any increase in taxes owed, money lost to credits that were removed, and any increase or decrease in interest. It wraps up with the total amount you owe and when it must be paid.

Below these main components, you’ll find more detailed steps. The IRS tells you how to access your account history, how to pay if you agree with the new balance, and what to do if you do not agree with their decision.

What the IRS Wants From You

There are different paths you can take, depending on whether or not you agree with the changes made by the IRS. The simplest option is to pay what you owe in full and strive to avoid audits in the future. 

However, if you do not agree with their assessment, you can review your account with an IRS representative. Consider talking with a tax pro about an audit reconsideration, but make sure that you reach out by the deadline on your notice. The CP22E states that if you do not contact them or take other action, they will assume you agree with the changes they made.

Making Payments If You Can't Afford to Pay in Full

There are several ways you can make payments on the taxes you owe. If you can pay in full, you can do so electronically to receive immediate confirmation of your payment. Note that there is an additional fee if you pay from a debit or credit card instead of a checking account.

You may also look into a short-term payment plan or long-term installment agreement. This allows you to stretch your payments over a period as long as 72 months, depending on how much you are able to pay each month. You will need to apply for an installment agreement with the IRS; it is not always automatically granted. While you are waiting for a decision on your installment agreement, if your request isn’t automatically approved, collection actions temporarily cease.

Beyond payment plans, there are additional options available to you. An Offer in Compromise settles your tax debt for less than you technically owe. In order to have your offer accepted, you will need to demonstrate that you truly cannot afford to pay more. If the IRS looks at your finances and thinks that your offer does not reflect what you are capable of paying, they will not accept it.

If you are in truly dire financial straits and cannot afford to pay anything, it’s time to look into Currently Not Collectible (CNC) status. This isn’t the ideal situation, as penalties and interest continue to accrue until what you owe is paid in full. Furthermore, this status does not last forever; the IRS will check in on your financial situation periodically. Once they see that you have returned to a state of financial stability, they will resume their collection actions as long as the statute of limitations has not passed.

Assessed Penalties and How They Are Calculated

Typically, if you receive CP22E about changes made to your account after an audit, you will also incur penalties on your account. The exact penalties can vary, but the most common penalty that taxpayers face after an audit is the 20% accuracy penalty. 

If the IRS finds that you have not correctly calculated the amount of taxes you owe, either by understating your income, overstating your credits, or both, they can charge you 20% of the taxes you failed to calculate correctly. For example, imagine you receive a CP22E in the mail. They find that you understated your income and owe an additional $5,000 in taxes. You also claimed a credit you were not entitled to and owe an additional $2,000 due to that error. You now owe an additional $7,000. 

On this unstated liability, the 20% penalty comes to $1,400 bringing your total to $8,400. The IRS will also add interest to the penalties, increasing your tax due even more.

Is Penalty Abatement an Option?

Penalty abatement may be an option for you in certain circumstances. If your underpayment was the result of poor guidance from a tax advisor or inaccurate information on a tax form, such as a W2 or 1099, you may not have been able to anticipate that your tax return was inaccurate. In this situation, although you're responsible for what's reported on your return, it may be worth requesting penalty abatement from the IRS. 

Even if your underpaid taxes are the result of your own error, you may still want to request penalty abatement. You can only do this if your errors were unintentional and you genuinely attempted to do your taxes accurately. If your underpayment resulted from good faith efforts to pay what you owed, the IRS may grant your request. You may need to send a reasonable cause defense to show how you attempted to do your taxes accurately.

Accrued Interest

If you do not pay the amount listed in full, interest begins accruing after the due date listed on your CP22E. However, don’t forget that CP22E also outlines changes in the interest you are owed or that you owe. This amount will also accrue interest if you do not pay in full by the due date. Interest rates change quarterly, which may affect your total balance. As of the second quarter of 2024, the interest rate was 8% for corporate and individual underpayments.

Your Next Steps If You Receive a CP22E Notice

First, you should plan on taking action immediately. If you do not respond at all to the notice, the IRS will assume that you agree with their assessment and expect your full payment. If you agree with their assessment and believe the amount you owe is fair, you are free to pay and move on.

If you cannot pay in full or you disagree with their assessment, you should look into your IRS account. Your IRS account will include a detailed log of your tax filings, including penalties assessed, interest assessed, and action taken by the IRS to increase the amount you owe. 

From there, you can either contact the IRS directly to ask for clarification on what you owe or you can move right to contacting a tax professional. This is ideal if you owe significantly more than you can afford or than what you think you truly owe. It is also helpful if you are panicking, don’t know what your options are, and need some professional guidance.

As you work through this process, hold onto your CP22E notice. You’ll want to either reach out to the IRS or connect with a tax pro before the due date on your notice to avoid additional penalties and interest.

Audit Reconsideration

If you disagree with the amount that the IRS claims you owe, you may be able to request an audit reconsideration. This process reopens your IRS audit. You can use this time to present new information about your income or expenses for the time period in question. You can also request a reconsideration if you never appeared for the audit appointment, did not send the IRS the information they requested, or you moved before receiving the IRS audit report.

If you choose to move forward with an audit reconsideration, it’s important to consult a tax professional. They have handled their share of audit reconsideration requests and they know what evidence the IRS will look for.

Penalty Abatement

You may be able to handle your penalty abatement request over the phone. Your CP22E notice should have the phone number to call the IRS and the code to give them when you call. You’ll need to provide them with the notice you received, the penalty you are requesting relief from, and why you think it should be removed.

Many prefer to ask for penalty abatement in writing, as this gives you more time to figure out what you want to say. If you opt to submit your request in writing, you will need to send in Form 843.

Finding out that an audit resulted in you owing more money can be financially devastating, but you don’t have to figure out your next steps alone. Talking to a tax professional in your area can help you explore your options, determine what comes next, and make the best choice for your situation. 

Use TaxCure to search for local tax pros who have audit representation experience. They can also help you set up a payment arrangement to deal with the unpaid taxes that resulted from your CP22E notice.