IRS Code 971 is not inherently bad — it is a notice code that tells you the IRS has made a change to your tax account

Code 971 appears on IRS notices to indicate that the agency has adjusted your tax return, usually because of a discrepancy between what you reported and what the IRS found in its records. The code itself is neutral. What matters is why the adjustment was made and whether you agree with it. Some adjustments are routine corrections; others result from an audit or matching program. The presence of Code 971 does not mean you have done anything wrong — it means the IRS is telling you about a change and giving you a chance to respond.

The IRS uses standardized notice codes to categorize the reason for contact. Code 971 is one of several that signal an adjustment has been proposed. You will see it paired with other information on the notice itself: the specific tax year, the amount of the change, and the reason the IRS made it. That reason is what you need to read carefully, because it determines what you should do next.

Key Takeaways

  • Code 971 means the IRS has proposed a change to your return; the code itself does not indicate whether the change is correct or incorrect.
  • The notice will state the specific reason for the adjustment — such as unreported income, a disallowed deduction, or a math error — and that reason determines your next step.
  • You have the right to disagree with the adjustment and request an explanation or appeal, even if the notice does not explicitly say so.
  • If you do not respond to a Code 971 notice within the timeframe stated, the IRS will treat the proposed adjustment as accepted and may take collection action.

Common reasons the IRS sends a Code 971 notice

The IRS matches information from third parties — employers, banks, investment firms — against what you reported on your return. If W-2 income, 1099 interest, or 1099 dividend amounts do not match, the IRS will propose an adjustment. This is one of the most frequent reasons for Code 971. The adjustment may be correct if you forgot to report the income, or it may be an error if the third party reported the wrong amount.

The IRS also sends Code 971 when it disallows a deduction or credit you claimed. Common examples include home office deductions that do not meet the rules, charitable contributions without proper documentation, or child tax credits claimed for dependents who do not meet the age or relationship requirements. In these cases, the IRS is saying: we do not believe this deduction or credit is valid under tax law.

Math errors on your return — addition mistakes, transposition errors, or using the wrong tax table — also trigger Code 971. These are usually straightforward to resolve because the IRS will show you the error and the correction. If you agree, you do nothing. If you disagree, you can explain why.

What you should do when you receive a Code 971 notice

Read the entire notice carefully. The IRS will explain what it changed, why it changed it, and how much additional tax (or refund) results from the change. The notice will also state a deadline — usually 30 days — by which you must respond if you disagree. Do not ignore this deadline, because missing it can result in the adjustment becoming final.

If you agree with the adjustment, you do not need to do anything. The IRS will process the change, and you will receive a bill or refund depending on the outcome. If you disagree, you have two main options: you can provide additional documentation to support your original position, or you can request that the IRS explain its reasoning in more detail. Some notices include a form you can use to respond; others ask you to write a letter.

Keep copies of any documents you send to the IRS, and send them by certified mail if possible so you have proof of delivery. If the adjustment involves income you did not report, gather bank statements, 1099 forms, or other records showing where the money came from. If it involves a deduction, collect receipts, invoices, or other proof that the expense was legitimate and deductible.

When Code 971 results from an audit

Code 971 can appear on a notice that results from a full or partial audit of your return. In an audit, an IRS agent reviews your records in detail and may propose adjustments to multiple items. The notice will explain which items were examined and what changes the agent proposes. You will have the right to appeal the agent's findings if you disagree.

If your return was audited by mail, the IRS will ask you to send documents by a certain date. If it was audited in person, you may have already met with an agent and discussed the issues. Either way, the Code 971 notice formalizes the agent's proposed adjustments and gives you a deadline to respond. At this stage, you can request an appeals conference if you believe the agent made an error or if you have new information to present.

How to respond if you disagree with the adjustment

The notice itself will tell you how to respond. Some notices include a response form; others ask you to write a letter. In your response, state clearly which adjustment you disagree with and why. If the IRS says you did not report income, explain where the money came from or provide evidence that it was not taxable. If the IRS disallowed a deduction, explain why you believe it qualifies under tax law and provide supporting documents.

You do not need to hire a tax professional to respond, but if the adjustment is large or complex, it may be worth the cost. A CPA or tax attorney can review the IRS's position, help you gather evidence, and draft a response that addresses the IRS's concerns directly. If you cannot afford professional help, the IRS Taxpayer Advocate Service offers free assistance to taxpayers who are having trouble resolving disputes with the agency.

Send your response to the address shown on the notice, not to a local IRS office or online. The notice will specify where correspondence should go. Keep a copy for your records and send by certified mail if possible.

What happens if you do not respond to a Code 971 notice

If you do not respond by the deadline stated on the notice, the IRS will treat your silence as agreement. The proposed adjustment becomes final, and the IRS will assess the additional tax owed. You will receive a bill, and if you do not pay, the IRS can take collection action: placing a lien on your property, garnishing your wages, or seizing bank accounts.

Even after the adjustment becomes final, you may still have options. You can request a payment plan to spread the tax bill over time, or you can file an appeal if you believe the IRS made a legal error. However, these options are more complicated and costly than responding to the original notice. The best course is to respond within the deadline, even if your response is simply a letter explaining why you believe the adjustment is wrong.

Frequently Asked Questions

Does Code 971 mean I am being audited?

Not necessarily. Code 971 can result from an audit, but it also appears on notices for routine adjustments based on information matching or math errors. The notice will explain the reason for the adjustment. If you were audited, the notice will say so and describe which items were examined.

Can I appeal a Code 971 adjustment?

Yes. If you disagree with the adjustment, you can request an appeals conference through the IRS Appeals Office. The notice will explain how to request an appeal. You must respond to the original notice first; an appeal is a separate step that comes after.

What if the Code 971 notice is wrong?

Respond to the notice and explain why you believe it is wrong. Provide documents that support your position. If the IRS does not agree, you can request an appeal or file a claim for refund if you have already paid the additional tax.

How long do I have to respond to a Code 971 notice?

The notice will state a deadline, usually 30 days from the date of the notice. If you need more time, you can request an extension by writing to the IRS at the address shown on the notice before the deadline expires.

Do I need a lawyer to respond to a Code 971 notice?

No. You can respond on your own by providing documents and a written explanation. However, if the adjustment is large, complex, or involves legal questions about tax law, a tax professional or attorney can help you build a stronger case.