Received a Tax Notice for Your 2025 Return? Here’s What to Do If There Was a Mistake

Filing your tax return doesn’t always mean the process is finished.

Many taxpayers are surprised to receive a letter months later from the IRS or California Franchise Tax Board (FTB) stating that something on their return doesn’t match government records or was calculated incorrectly.

At Velin & Associates, Inc., we regularly help clients resolve these notices — and in many cases, the issue is fixable without major consequences, if handled properly and on time.

If you recently received a notice for your 2025 tax return, here’s what you need to know and how to respond.

First: Don’t Panic — But Don’t Ignore It

Receiving a tax notice can feel stressful, but most notices are not audits.

They are usually:

• Automated corrections
• Requests for clarification
• Adjustments based on missing or mismatched information

However:

👉 Ignoring the notice can make the situation significantly worse.

Penalties, interest, and additional enforcement actions may apply if no response is provided.

Common Reasons You Received a Tax Notice

Tax agencies compare your return with third-party data (W-2s, 1099s, brokerage reports, etc.). When something doesn’t match, a notice is generated.

1. Income Mismatch

One of the most common issues:

• A Form 1099 or W-2 was not included
• Income was reported incorrectly

Example:

A freelancer reports $85,000 of income but forgets to include a $12,000 Form 1099.

👉 The IRS recalculates the return and sends a notice showing:

• Additional tax due
• Interest and penalties

2. Math or Calculation Errors

Even small errors can trigger a notice:

• Incorrect totals
• Misapplied tax rates
• Credit miscalculations

Example:

A taxpayer incorrectly calculates a tax credit and reduces their tax by $3,000 instead of $1,500.

👉 The IRS corrects the return and requests payment for the difference.

3. Incorrect Credits or Deductions

Common problem areas:

• Earned Income Tax Credit
• Child-related credits
• Business deductions

Example:

A taxpayer claims deductions for business expenses without sufficient documentation.

👉 The tax authority may disallow the deduction and adjust taxable income.

4. Missing Forms or Schedules

If required forms are missing:

• Schedules for business income
• Investment reporting forms
• Foreign asset disclosures

👉 The return may be considered incomplete.

5. State vs Federal Differences

California often does not fully match federal tax rules.

Example:

A deduction allowed federally is not allowed in California.

👉 Result:

• Federal return accepted
• FTB issues a notice adjusting state tax

Types of Notices You May Receive

Understanding the type of notice helps determine how urgent and complex the situation is.

Informational Notice

• No action required
• Just confirming changes

Adjustment Notice

• Tax authority corrected your return
• May include balance due

Request for Information

• Asking for documents or clarification

Balance Due Notice

• Indicates tax, penalties, and interest owed

Step-by-Step: What You Should Do

1. Read the Notice Carefully

Each notice includes:

• Explanation of the issue
• Proposed changes
• Deadline to respond

👉 Do not assume it is correct — review details thoroughly.

2. Compare With Your Original Return

Check:

• Reported income
• Deductions
• Credits
• Supporting documents

3. Determine If the Notice Is Correct

There are two possible outcomes:

✔️ The notice is correct
❌ The notice is incorrect

If the Notice Is Correct

Take Action Immediately

• Pay the balance as soon as possible
• Or set up a payment plan

👉 This reduces additional penalties and interest.

Example:

A taxpayer receives a notice showing:

• Additional tax: $5,000
• Interest and penalties: $400

If paid immediately:

• Stops further accumulation

If delayed:

• Costs continue to grow monthly

If the Notice Is Incorrect

Respond With Documentation

You must:

• Provide supporting documents
• Clearly explain the discrepancy

Examples of documentation:

• W-2s or 1099s
• Bank statements
• Receipts
• Contracts

Example:

A taxpayer receives a notice claiming unreported income of $15,000.

However:

• The income belongs to a different taxpayer with a similar name

👉 With proper documentation, the issue can be resolved and removed.

Should You Amend Your Tax Return?

In some cases, filing an amended return (Form 1040-X) may be necessary.

You may need to amend if:

• You discover additional errors
• You forgot to report income
• You need to correct deductions

However:

👉 Do not automatically amend just because you received a notice.

Sometimes:

• The tax agency already adjusted the return
• Amending could create duplication or confusion

Deadlines Matter

Most notices have strict deadlines:

• 30 days to respond (common)
• Longer for certain cases

Missing the deadline can result in:

• Loss of appeal rights
• Additional penalties

Penalties and Interest: What to Expect

Depending on the issue, you may face:

• Failure-to-pay penalties
• Accuracy-related penalties
• Interest (compounded daily)

👉 The sooner you resolve the issue, the lower the cost.

When You Should Seek Professional Help

While some notices are simple, others require careful handling.

You should consider working with a CPA if:

• The amount owed is significant
• The issue involves business income
• There are multiple years involved
• You disagree with the notice
• You received multiple notices

Example:

A business owner receives:

• IRS notice for underreported income
• FTB notice for separate adjustment

👉 Without coordination, responses may conflict.

A CPA can:

• Align both responses
• Minimize penalties
• Ensure consistent reporting

How to Prevent Future Notices

1. Keep Accurate Records

• Track all income sources
• Maintain organized documentation

2. Reconcile Before Filing

• Match all W-2s, 1099s, and statements

3. Work With a Professional

• Especially if you have multiple income streams

4. Plan for State Differences

• Particularly important in California

Key Takeaways

• Receiving a tax notice is common — but must be addressed
• Most notices result from mismatched or missing information
• You must review, verify, and respond before the deadline
• Paying or responding quickly reduces penalties
• Professional guidance can prevent costly mistakes

Final Thoughts

Tax notices are not the end of the world — but they are not something to ignore.

Handled correctly, many issues can be resolved quickly and efficiently.
Handled incorrectly, they can lead to unnecessary penalties, stress, and ongoing problems.

If you’ve received a notice for your 2025 tax return and are unsure how to proceed, getting professional guidance early can make a significant difference. For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc.

8159 Santa Monica Blvd STE 198/200
West Hollywood, CA 90046
📞 323-902-1000
📧 dmitriy@losangelescpa.org

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