The first step in understanding the error would be to contact the IRS and have them explain why they sent the notice to begin with. There is an IRS website that can also be utilized to determine why the IRS sent the notice and the steps you must take to satisfy the IRS's inquiry. The website is:
https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter
The IRS can also be reached by phone. The number to call is 1-800-829-1040.
Secondly, after you speak to the IRS...go back to the tax return that they are inquiring about and determine if their position is an accurate one. Many times the IRS will retract their position if you have a valid and consistent reason why you did what you did. The key here is communication. However, if there was income that you left off the tax return there is little that you can do except pay the tax that would have been paid when the return was originally filed. At this point, you should contact a local CPA to help you deal with the IRS. In most cases, the penalties the IRS may be levying against you can be abated (or eliminated).
Once you have communicated your position and the IRS conveys what their expectations are, you can begin to take the necessary steps to resolve this matter. Remember, do not just pay the amount that the IRS says you owe...contact the IRS first, and then possibly a local CPA to help.
