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A tax adjustment occurs when the IRS changes the information on a taxpayer’s return due to errors, discrepancies, or underreporting of income or deductions. Adjustments can result in an increase or decrease in the amount of tax owed, and they are typically triggered by:
- IRS audits.
- Underreported income detected through third-party reports (such as CP2000 Notices).
- Mathematical or clerical errors on the tax return.
Taxpayers who receive a tax adjustment notice should review it carefully to ensure the IRS’s findings are accurate. If the taxpayer disagrees with the adjustment, they can file an appeal or request a reconsideration by providing documentation to support their original return.
Responding promptly to tax adjustment notices can help taxpayers avoid additional penalties and interest charges.