When you file a tax return and fail to pay the balance due the IRS will begin sending you a series of collection notices or letters. It is important that you understand the process, what the notices mean and what you can expect following the receipt of each notice.
CP-14 Notice-You Have Unpaid Taxes
This is the first notice you will receive and provides you with the amount you owe including interest and penalties and demands payment within 21 days. If you disagree with the balance due shown in the notice, it is best to call the IRS or respond by mail and explain why you believe the notice is incorrect. A common reason for disagreement is a result of the misapplication of your tax payments. If you agree with the balance due you should either pay in full or make other payment arrangements with the IRS. If you do not make full payment by the date demanded in the notice you will incur additional interest and penalties.
CP-501 Notice-Reminder of Balance Due
If you failed to adequately respond to the CP-14 Notice you will normally receive a CP-501 Notice within 4-5 weeks. This notice demands payment within 10 days and warns you that a Notice of Federal Tax Lien can be filed at any time which may harm your credit rating.
CP-503 Notice-Second Reminder
This notice is a second reminder of your back taxes and you are receiving it because you have not paid your outstanding balance or responded to earlier notices. It demands payment within 10 days. You’ll see that the amount you owe has increased from the earlier two notices as a result of additional penalties and interest. Of course, if you’re unable to make full payment, you can make alternative payment arrangements for tax relief.
CP-504-Notice of Intent to Seize (Levy) Your State Tax Refund or Other Property
If you still haven’t addressed your IRS tax problems you’ll receive a CP 504 Notice which is much more threatening than previous notices. It also seeks payment in 10 days and tells you a levy will be issued against any state tax refunds owed to you. In addition, it tells you the IRS will start searching for other property you own or income sources which they can levy. This can include bank accounts, wages, commissions, and social security payments. If you continue your failure to pay or make payment arrangements they will send you a Final Notice of Levy giving you a right to a hearing before the IRS Office of Appeals, if you have not already received such a notice. Once the time for exercising your Appeals hearing right expires the IRS will begin levy action against you.
It’s generally best to deal with your back tax problems as soon as possible. Upon receipt of any of these notices you can consider solutions such as:
- Installment Agreement
- Offer in Compromise
- Currently Not Collectible or Hardship Status
- Innocent Spouse Status
- Penalty Abatement
- Audit Reconsideration
If you have received a CP-14, CP-501, CP-503, CP-504 notice or a Final Notice of Intent to Levy call today to speak with our tax resolution specialists in our Boca Raton, Plantation, or West Palm Beach offices. Learn how we can help solve your back tax problems and provide needed tax relief.