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Understanding the Most Common IRS Notices

For many taxpayers, receiving a letter from the IRS can feel intimidating. The envelope arrives with the IRS seal, and immediately, worry sets in: Did I make a mistake? Am I in trouble? The truth is, IRS notices aren’t uncommon, and most of them can be resolved fairly easily once you understand what they mean.

This article walks through the most common types of IRS notices, explains why taxpayers receive them, and provides guidance on how to respond.

Why the IRS sends notices

The IRS communicates primarily by mail — not phone or email. Notices are typically sent for reasons such as:

Clarifying information on a tax return,
Notifying you of a balance due,
Confirming changes made to your return,
Requesting additional documentation, and
Alerting you to a possible error.

Each notice is numbered in the upper right-hand corner (for example, CP2000 or Notice CP12). That code is your key to understanding the purpose of the letter. In all cases, contact us if you have questions about how to proceed.

Five common notices and what they mean

1. CP2000, proposed changes to your tax return. This notice is issued when the IRS finds a mismatch between the information […]

By Linkenheimer LLP|2025-10-01T16:17:58+00:00October 1st, 2025|irs|0 Comments

Tax Court Case Provides Lessons on Best Recordkeeping Practices for Businesses

Running a successful business requires more than delivering great products or services. Behind the scenes, meticulous recordkeeping plays a crucial role in financial health, compliance and tax savings. Good records can mean the difference between successfully defending a deduction and losing valuable tax breaks. A recent U.S. Tax Court decision underscores just how important this is.

Why it matters

The IRS requires all businesses — no matter how small — to maintain records that accurately reflect income, expenses, assets and liabilities. Without these records, it’s nearly impossible to:

Substantiate tax deductions and credits,
Track cash flow and profitability,
Prepare accurate financial statements,
Monitor the progress of your business,
Support decisions for financing, and
Demonstrate compliance during an IRS audit.

In short, strong recordkeeping protects your business, both for operational and tax law purposes.

Taxpayer loses deductions due to insufficient records

In one case, a union power‐line worker also had business interests in a storm response partnership, a salon and a rental property. He claimed significant losses and business expenses on his return for the year in question. Among his claimed deductions were partnership losses and expenses for tools, clothing and travel.

In Tax Court Memo […]

By Linkenheimer LLP|2025-10-01T16:08:27+00:00October 1st, 2025|business, tax planning, Tech|0 Comments

The New Face of Digital Deception: How AI is Changing the Scam Game (And How to Stay Ahead)

Remember when scam emails were easy to spot? The Nigerian prince with questionable grammar? Those days are rapidly becoming quaint, nostalgic memories. Today’s digital threats are wearing sophisticated masks, powered by the same AI tools revolutionizing legitimate business. But here’s the good news: understanding these evolving threats is your first line of defense.

The AI Revolution Cuts Both Ways

While we’re leveraging AI to streamline processes and increase work life balance, bad actors are using similar tools to craft increasingly convincing schemes. The technology that helps us serve our clients better is, unfortunately, also making scammers more dangerous.

But knowledge is power, and that’s exactly what we’re sharing today.

The New Threats on Your Digital Doorstep

1. The California FTB Text Scam: A Real-Time Warning

Right now, Californians are being bombarded with fake text messages claiming to be from the Franchise Tax Board about tax refunds. An example would be: “Your tax refund has been processed, click here to provide bank details.” It’s 100% fake. The FTB never texts about refunds—period. These scams use […]

By Linkenheimer LLP|2025-09-09T17:20:17+00:00September 9th, 2025|AI, scams, Tech|0 Comments

Payroll Tax Implications of New Tax Breaks on Tips and Overtime

Before the One Big Beautiful Bill Act (OBBBA), tip income and overtime income were fully taxable for federal income tax purposes. The new law changes that.

Tip income deduction

For 2025–2028, the OBBBA creates a new temporary federal income tax deduction that can offset up to $25,000 of annual qualified tip income. It begins to phase out when modified adjusted gross income (MAGI) is more than $150,000 ($300,000 for married joint filers).

The deduction is available if a worker receives qualified tips in an occupation that’s designated by the IRS as one where tips are customary. However, the U.S. Treasury Department recently released a draft list of occupations it proposes to receive the tax break and there are some surprising jobs on the list, including plumbers, electricians, home heating / air conditioning mechanics and installers, digital content creators, and home movers.

Employees and self-employed individuals who work in certain trades or businesses are ineligible for the tip deduction. These include health, law, accounting, financial services, investment management and more.

Qualified tips can be paid by customers in cash or with credit cards or given to workers through tip-sharing arrangements. The deduction can be claimed […]

By Linkenheimer LLP|2025-09-09T16:10:50+00:00September 9th, 2025|1099, deduction, New Tax Laws|0 Comments

New Rules Could Boost Your R&E Tax Savings in 2025

A major tax change is here for businesses with research and experimental (R&E) expenses. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) reinstated the immediate deduction for U.S.-based R&E expenses, reversing rules under the Tax Cuts and Jobs Act (TCJA) that required businesses to capitalize and amortize these costs over five years (15 years for research performed outside the United States).

Making the most of R&E tax-saving opportunities

The immediate domestic R&E expense deduction generally is available beginning with eligible 2025 expenses. It can substantially reduce your taxable income, but there are strategies you can employ to make the most of R&E tax-saving opportunities:

Apply the changes retroactively. If you qualify as a small business (average annual gross receipts of $31 million or less for the last three years), you can file amended returns for 2022, 2023 and/or 2024 to claim the immediate R&E expense deduction and potentially receive a tax refund for those years. The amended returns must be filed by July 4, 2026.

Accelerate remaining deductions. Whatever the size of your business, if you began to amortize and capitalize R&E expenses in 2022, 2023 and/or 2024, you can deduct the remaining amount either on […]

By Linkenheimer LLP|2025-09-08T19:36:59+00:00September 8th, 2025|deduction, New Tax Laws, research credit, tax implications|0 Comments