What This Letter Means
Letter 3404C comes out of an underreporter case. The IRS compared the income on your return with the information returns payers filed, such as Forms W-2, 1099 and Schedule K-1. You disputed one of those items. Maybe you said the income isn't yours, or the amount is wrong.
To sort it out, the IRS wants to go to the source. Letter 3404C tells you which payer or payers it intends to contact. It goes to both individuals and businesses.
Why You Get Advance Notice
The law generally bars the IRS from contacting third parties about your tax liability unless it first tells you. The IRS must provide that notice at least 45 days before the contact period begins. IRS procedures say to wait until the 46th day after this letter before writing to the payer.
What Happens Next
- The IRS asks the payer for documentation about the income it reported under your name or number.
- If the payer's records show the income is not yours, that supports your position.
- If the payer confirms the income is yours, the IRS sends you a follow-up letter with a copy of the payer's response.
What to Do
- Check the payer names on the letter against your records.
- Contact the payer yourself. A corrected form or a written statement from the payer can move your case faster.
- Send what you get to the IRS address on your letter with your name, taxpayer identification number and the tax year.
- Keep copies of everything.
One warning. Saying you never received a Form 1099 is not a defense. You must report all taxable income you received, whether or not a form arrived.
Your Rights
You can ask the IRS for a record of the third parties it contacted about your tax liability.
Keep Your Other Deadlines
This letter does not pause anything else in your case. If you get a statutory notice of deficiency, its Tax Court deadline runs on its own. A payer inquiry does not extend it.
If the IRS is contacting a payer about income you dispute, call us at (813) 229-7100.