Reading the notice correctly
Many income tax disputes begin not with an audit but with an automated notice comparing your return with forms filed by employers, banks, brokers, or payment platforms. These notices propose changes and give you a chance to agree or disagree before additional tax is assessed. Other notices come out of an examination, question specific deductions or credits, or announce that a balance is due. New York State sends its own notices through the Department of Taxation and Finance, and a federal change can lead to a state adjustment later, since New York generally expects taxpayers to report federal changes. The title of the notice, the tax year, and the response date tell you which kind you have.
Common reasons the numbers do not match
Information returns are sometimes wrong, duplicated, or missing cost basis, especially for brokerage sales. Income may have been reported under the wrong person's identification number, or a payment that was really a reimbursement or a loan may have been reported as income. Deductions and credits are often questioned when the IRS lacks documentation it expected to see, and residency questions can cause disputes between states. Identity theft can also put income you never earned on IRS records. Gather the notice, the return, the information returns, and the records supporting your position before you respond.
Responding without making it worse
A response should address each item the notice raises, agree where the notice is right, and explain with documents where it is wrong. Paying a disputed amount just to stop the letters generally turns any later challenge into a refund claim, while a partial agreement sometimes makes sense. If the response period passes, the next notice is often a notice of deficiency, which carries a strict deadline to petition the Tax Court. We review the notice, compare it with your records, and tell you whether a straightforward response is likely to be enough or whether the matter calls for representation through an examination or appeal. If the dispute touches several years or both federal and state returns, we coordinate the responses so they stay consistent.
