Types of IRS Collection Notices

If you receive an IRS collection notice, this means that you have unpaid taxes that the government needs to collect. Your initial collection notices are a reminder about your unpaid federal tax or state tax bill. Ignoring these notices and other collection notices will have severe consequences (e.g., bank levies, federal liens). 

Learn about the most common notices you may receive if you have a balance due on your federal tax return.

Balance Due Notices

A balance due notice is often the initial correspondence you will get from the IRS regarding your unpaid tax bill. IRS CP14 letters will detail the exact amount of tax debt you owe the government for a specific tax year, accrued penalties and interests, and a due date for your first payment.

Typically, you will receive two opportunities to settle your tax bill before the IRS escalates its collection efforts. Following the initial balance due notice (CP501), the IRS will issue a second notice (CP503) as a reminder to promptly address your outstanding tax liability.

Final Balance Due Notice

If you fail to respond to the previous two letters, the IRS will send a final balance due notice (CP504) that will include a proposed levy intent on your bank accounts, if the tax bill remains unpaid. This letter will also inform you that the IRS is searching for other assets to levy, such as your car, boat, home, retirement account, or other savings accounts.

Final Notice and Notice of Intent to Levy

Taxpayers who fail to pay taxes after receiving other collection notices will be sent an ACS Letter LT11, otherwise known as the Final Notice and Notice of Intent to Levy. This letter informs you that your assets and property will be levied to pay off your tax bill.

After you get this letter, your assets and funds will be seized after 30 days. During this 30-day time frame, you will be able to respond to the letter, such as by appealing for a partial release or arranging for an installment agreement to start making payments on your unpaid taxes.

Outstanding Tax Returns Notice

In addition, you might receive an ACS Letter LT19 as a notification to settle your overdue tax returns. This letter serves as a formal demand from the IRS, indicating that previous attempts have been made to contact you regarding your outstanding tax return. The IRS typically sends this letter when there is an unpaid balance on your most recently reviewed or updated tax return.

How Are IRS Notices Sent?

Generally, IRS notices are sent via mail, such as certified mail. However, depending on the balance you owe and whether or not you have failed to respond to other tax collection efforts, the IRS may deliver you one of these notices to your place of business.

Should You Keep Notices?

Taxpayers should keep any notices from the IRS as part of important tax records. Just like you may need records of taxes you have filed, you will also need to have records of correspondence with the IRS. Tax records and letters from the IRS should be kept for at least three to seven years just in case you need to review these documents in the future.

What Should You Do After You Receive a Notice?

After you get a notice of tax collection from the IRS, you should read the letter thoroughly, so you can understand why the IRS is contacting you. The letter will give you specific information about your tax debt and additional information, such as appeals you can file with the government if you disagree about your tax bills.

Sometimes, your letter will require a response with a corresponding due date. You should respond to the letter as soon as possible to preserve your rights as a taxpayer and reduce any penalties that may be charged to your debt for ignoring the letter.

How Should You Respond to a Letter?

The letter from the IRS will tell you the best way to respond (e.g, mail, fax). Some letters are equipped with a unique QR code that allows taxpayers to respond to letters online through the Documentation Upload Tool. Taxpayers should respond to collection letters before the deadline to avoid another collection letter.

Should Taxpayers Contact a Lawyer About Collection Notices?

Taxpayers who are concerned about collection efforts from the IRS should contact a tax lawyer for guidance about their next step. A lawyer who practices tax law can help you with your appeals process or give you advice about how to pay your tax bill before a levy is filed against your assets.

What Options Do You Have to Avoid Collection Efforts?

To effectively address unpaid taxes and meet the IRS’s collection requirements, enrolling in an installment agreement is often the most suitable choice. This arrangement allows you to gradually pay off your tax debt over a period of time. There are several plans that are part of the installment agreement group, such as short-term payment plans and long-term payment plans. When you sign up for an installment agreement, you will be able to make monthly payments to reduce your tax debt and avoid the IRS filing any legal actions.

Understandably, taxpayers who get an IRS collection notice may be concerned about collection practices such as wage garnishment or bank levies. 

For more information about how to respond to different types of collection letters, contact Damiens Law Firm, PLLC at 601-957-9672 today.