The IRS has announced that it will be sending 5 to 8 million CP14 notices to taxpayers that filed returns with taxes owed. The CP14 notice is the first in a series of notices that the taxpayer will receive. Each of these notices provides you with information including where you are at in the collection process, the risks you face, as well as the opportunities available with some of the notices. These notices are typically sent out sequentially (though not all are required) 5 to 8 weeks after the prior notice was sent.
Unfortunately, many taxpayers who owe the IRS don’t understand the notices or even read bother to open the letters. Many taxpayers that come to me with IRS problems, drop unopened IRS correspondence on my desk. Most who do this simply are afraid to open the notices and don’t want to get bad news. That can get them in a lot of trouble (think paycheck garnished, bank account levied, or Federal tax Lien filed) and sometimes create missed opportunities. I don’t want you to do that.
In this article, I’ll discuss the notices you’ll receive when you owe the IRS, along with some of the risks (and opportunities), that each notice brings you.
What are the IRS’s Collection Notices?
During the collection process, the notices you receive may include:
- CP 14 – This notice lets you know that the tax amount has been assessed against you, the amount due, what it is made up of, and how to pay the amount due. This is an ideal time to get on a plan to resolve your issue and minimize risk of penalties, levies and liens. Why is this notice important?
- The IRS cannot begin collection action until the taxpayer receives legal notification of the tax due (the CP14) and the taxpayer fails to take action.
- The IRS 10 year statute of limitation to collect a tax debt begins with the date the tax is assessed and taxpayer is notified.
- CP 501/CP503 – These are next and considered to be “Reminder Notices”. These notices begin to get written in a more serious tone and the IRS is letting the taxpayer know that the situation is getting more serious. This is a great time to work with the IRS to get a plan in place.
- CP 504 – If the taxpayer still does not address the tax issue as instructed, the next step is the CP 504. The CP504 gives the IRS the right to levy a state tax refund if not dealt with within the 30 days permitted on the notice. You should deal with the problem by the time it gets to this level.
- LT 11, Letter 1058, or CP90 – These are the “Final Notice” of intent to levy. The “Final Notice” is the big one! Failure to respond to these notices within 30 days can result in a bank account levy, wage or social security garnishment, or other types of levies or seizures. If you get this notice, you need to respond as quickly as possible to prevent those levies and/or garnishments. Remember, I said that the notices also have opportunities? This notice also gives you an opportunity to exercise your CDP (Collection Due Process) rights. To get full CPD rights, the taxpayer must file a Form 12153 within 30 days of the notice. CDP rights include –
- A right to an Appeals Hearing where you will get an opportunity to propose an alternative to being levied before an independent IRS appeals group.
- Halt enforced collection (levies) while the hearing is pending, and
- protect your rights to take your case to tax court if you choose to later.
- Note – Filing for the CDP hearings stops the 10 year collection clock.
If you miss the 30 day deadline, for a period of 1 year after the date of the “Final Notice”, you still have the right to request an equivalency hearing by filing form 12153. The differences with an equivalency hearing is that the taxpayers no longer has rights to tax court and while the IRS typically does not pursue enforced collections while the hearing is pending, it is at the discretion of the IRS. On the other hand, the clock for the 10 year statute of limitations continues to run while the hearing is pending so there are pros and cons.
If you owe the IRS, this article should help you by understanding the purpose, threats and opportunities of each notice along with where you are in the process.
Do You Need Help?
If you need help with a Tax Penalty Relief or other IRS problem, I’d be happy to talk with you. Please give me a call at (954) 715-7285 or set up some time on my personal calendar at https://jablonskyandassociates.com/contact/