The opening lines to IRS Notice CP21 are, "Changes to your [year] Form 1040 - Amount due: [$amount] - Based on the information you provided, we changed your [year] Form 1040 to correct your: . . .", and then vaguely lists the areas affected.
Notices CP21 (A-I) are used by the IRS to notify you of changes to your return. The most common Notices are the CP21A and the CP21E but the CP21B, CP21C & CP21I are used as well (See Examples below). They are used in varying situations:
CP21 Return Changes
The IRS' change to your return is supposedly "based on information" you gave them or they received. But, this may be the first notice you get from them. Therefore, follow the Prep Steps for IRS Notice CP21A & see Mr. Hopkins in Denver or Colorado Springs before proceeding. You only have 60 days to respond.
The IRS has assessed the tax. Therefore, even if you contest it, the IRS will be asking for payment. You don't waive your rights by making payments. In fact, you add to your subsequent claim for refund. So, follow the Collection Prep Steps & set up a payment plan with the IRS until the mistake can be reversed.
In addition to the Notice CP21, you will also receive a Publication 5219 which (barely) explains a Penalty Abatement Request. Please visit the "Penalties Reduced" page of this website for more information.
The IRS will likely require a Form 433F or Form 433A from you where you disclose your income, expenses, assets & liabilities to the IRS. Therefore, you must be careful about what you say and send to the IRS. These will be used against you! Take the TaxHelp Webinars to properly complete the Forms 433.
Various IRS Notices CP21A: