Why You’re Getting Tax Notices (and How to Respond Confidently)

Have you ever opened your mailbox to find an official letter from the IRS? 

That moment of panic is universal. Your heart races, your palms sweat, and your mind jumps to worst-case scenarios before you’ve even opened the envelope.

What did I do wrong?

How much is this going to cost me?

How long will this take to fix?

If you’re losing sleep over tax notices or living in fear of receiving one, you’re not alone. Most business owners don’t understand why they get these notices or how to handle them. That confusion costs time, money, stress, and mental energy that could be spent doing what you do best: running your business.

At Whirks, we’ve helped hundreds of business owners navigate these intimidating government communications. In this article, I'll break down the top three reasons tax notices land in your mailbox…and the exact steps you can take to resolve them quickly, calmly, and confidently.

Unlike most blogs, we'll explain what's really going on behind the scenes and show you what your payroll provider should be doing to help.

What You Need to Know About the Top 3 IRS Tax Notice Triggers

The first step in addressing any tax notice is understanding what it's actually about. While there are dozens of different notices the IRS might send, most fall into these common categories:

1. Tax Return Errors or Discrepancies

IRS notices most often result from missing information, mismatched numbers, or incorrect claims—errors that are more common than you think. These errors can range from simple mathematical mistakes to more complex issues like:

• Missing information or forms
• Numbers that don’t match across different sections
• Deductions or credits claimed incorrectly
• Income reported to the IRS that wasn’t included on your return

All tax agencies, including the IRS and state departments of revenue, require specific tax forms to be filed by their respective due dates, often electronically. When paper forms are filed instead of electronic submissions, they can get lost in transit, triggering a notice.

For new employers, a common issue occurs when the state requires electronically filed forms, but you haven’t yet established an account with the state tax agency—making electronic filing impossible. These situations typically require some back-and-forth correspondence to resolve and might include penalties or interest added to your account.

2. Unpaid Tax Liability Notifications

These notices can be particularly alarming. You’re certain you paid your taxes, yet here’s an official letter claiming you didn’t. So, what happened to your money?

The majority of unpaid tax notices we see result from:

• Lost Payments: When a check is mailed but never received
• Misapplied Payments: The IRS received your payment but credited it to the wrong account or tax period
• Rate Changes: Particularly with state unemployment taxes, where the state may have changed your tax rate without clear notification

We once handled a case where the IRS issued a refund check at the same time they requested payment for the same amount—all because they misapplied the original payment. While frustrating, these issues are usually straightforward and easy to resolve with proper documentation.

3. Audit Notifications and Identity Theft Concerns

While less common, these types of notices require immediate attention:

• Notice of Audit or Examination: Some returns are selected for audit to ensure accuracy and compliance with tax laws. This doesn’t necessarily mean you’ve done anything wrong—some audits are random.
• Identity Theft Concerns: When changes are made to your tax account, the IRS often sends a notice to alert you. This helps prevent unauthorized changes from occurring without your knowledge.

Why You're Getting These Tax Notices (Even if You Filed Everything Correctly)

It’s important to remember that tax agencies work with millions of taxpayers, and they make mistakes. The volume of paperwork they process means errors are inevitable.

But tax agencies aren’t the only ones who make mistakes. Your payroll company could be at fault too. Even large providers servicing companies across the country will have processing errors.

At Whirks, we believe our clients shouldn’t pay for mistakes they didn’t make. That’s why we take ownership and resolve tax issues fast. This level of accountability is what you should expect from any payroll provider and is worth considering when choosing a payroll provider.

What to Do When You Receive a Tax Notice

If that dreaded envelope arrives, follow these steps:

1. Don’t panic. Most notices are resolvable without major consequences.
2. Read the entire notice carefully. Identify what specific issue is being addressed and what action, if any, the notice is requesting.
3. Check the facts. Compare the information in the notice with your records to verify if there’s actually an error.
4. Forward it to your payroll provider or tax professional. If you use a payroll service, send them the notice immediately. They should assess the situation and work to resolve it on your behalf.
5. Keep detailed records. Maintain copies of all correspondence, proof of mailing, and records of any phone conversations regarding the notice.

What You Should Expect From a Payroll Partner if You Get a Tax Notice

Receiving a tax notice doesn’t mean you’ve done something wrong. It just means action is needed. This is exactly why having a trusted payroll partner matters.

You don't need to panic or spend hours on hold.

If you’ve struggled to get help with tax notices, or if your current payroll provider isn’t taking responsibility for their mistakes, it might be time to consider one that will.

At Whirks, we help our clients resolve tax issues quickly and cover the cost when we’re at fault—because your peace of mind matters.

Have you been struggling with tax notices or considering a change in payroll providers? Check out these resources: 

• What to Look For in a Trusted Payroll Provider
• Five Crucial Questions to Ask Before Choosing a New Payroll Provider
• How to Choose a Payroll Provider