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IRS Collection Notices

IRS Tax Collection Notices

Receiving an IRS collection notice can be a stressful experience, but understanding the purpose and implications of these notices is crucial to effectively manage your tax obligations. Have you received an IRS notice? Wondering what it means? Or how to respond? Then, contact us at McLaud Law P.C. today, or keep reading to learn more.

This overview explores some of the most common and important IRS collection notices and what actions taxpayers should take upon receiving them. We’ll also discuss fake IRS letters and the general timeline for when the IRS issues these kinds of notices.

Examples of Common IRS Collection Notices

CP14 – First Notice of Balance Due

This is typically the first notice issued by the IRS to taxpayers who have an outstanding tax debt. It is usually sent in cases where a taxpayer has filed their tax return but has an unpaid balance.

If you have received a CP14 notice, it’s important to read it carefully and review all the details provided. Take note of the amount owed and the due date for payment, and anything else you feel is important. All IRS notices will include practical instructions on how to proceed and resolve your issue. In this case, the notice will include instructions on how to make a payment, including online payment options, as well as how to request an installment agreement if you are unable to pay the full amount. 

CP501 – Reminder of Balance Due

Notice CP501 is a reminder of a due tax balance. This notice serves as a reminder to individuals who have previously received a CP14 notice, but have not yet addressed their unpaid balance.

Similar to Notice CP14, the CP501 includes practical instructions on how to resolve your tax debt. It provides guidance on making payments, including online payment options, and offers assistance to taxpayers who are unable to pay the full amount upfront.

CP503 – Second Reminder Notice

Following on from Notice CP501, this notice is a second reminder about an unpaid tax balance. Taxpayers will receive this notice if they fail to respond to previous notices of balance due.

Upon receipt of a CP503 notice, taxpayers should promptly review the details. The notice includes instructions on making payments, including online options, and offers assistance for those facing financial hardship.

CP504 – Final Notice and IRS Intent to Levy

This is a final notice of reminder of a balance due. The IRS issues this notice when a taxpayer has failed to pay their overdue tax balance, arrange a payment plan, or respond to any of the previous notices. This document also serves as notice of an intent to levy from the IRS, if payment is not arranged promptly.

Failure to take timely action may result in serious financial consequences, including seizure of assets and garnishment of wages. After issuing this notice, the IRS will seize your state or federal tax refunds, but they will usually send you another notice before seizing any other assets or garnishing your wages.

CP523 – Intent to Terminate Installment Agreement

Notice C523 is typically issued when a taxpayer has defaulted on their installment agreement for a tax debt. This notice is a critical reminder that a taxpayer has fallen behind on their payment plan, and immediate action is required in order to address the issue. It also serves as a notice of intent to levy, if the payment plan is not successfully recovered.

CP90 – Intent to Seize Assets and Right to a Hearing

A CP90 notifies taxpayers of the IRS’s intent to levy certain assets for unpaid taxes. It also informs the recipient of their right to a hearing, known as a Collection Due Process (CDP) Hearing. This is a legal necessity and provides the taxpayer with an opportunity to present their case if they disagree with the notice.

This is obviously a crucial notice from the IRS and signifies the formal initiation of collection actions in order to recover an unpaid tax debt. It is vitally important that this notice be responded to timely, so if you receive one, contact a tax professional like those at McLaud Law P.C. immediately to ensure the notice is responded to appropriately.

LT1058 – Final Notice of Intent to Levy

Letter 1058 is a notice from the IRS of its intent to seize a taxpayer’s property or rights to property. This typically involves a levy being attached to your wages or bank accounts up to the total amount owed.

This letter is issued if a taxpayer fails to pay their overdue tax balance, arrange a payment plan, or otherwise communicate with the IRS regarding their due balance. To avoid the levy, you must contact the IRS to make payment arrangements or get your account marked as uncollectible before the deadline on the notice. Much like the CP90 discussed above, this is vitally important that this notice be responded to timely, so if you receive one, contact a tax professional like those at McLaud Law P.C. as soon as possible.

LT11 – Intent to Seize Your Property

LT11 is essentially the same as LT1058, as it notifies the recipient that the IRS has received no attempts from them to pay their overdue taxes. The difference between LT11 and LT1058 is that Automated Collection System (ACS) will issue LT11, whereas it is typically a revenue officer who will issue LT1058 directly.

Receiving LT11 signals that previous attempts to resolve the outstanding tax debt have been unsuccessful, and the IRS formally intends to escalate collection efforts through levies. Recipients typically have up to 30 days to respond in order to prevent the levy from being enacted. Just as with the LT1058, this is vitally important that this notice be responded to timely, so if you receive one, contact a tax professional like those at McLaud Law P.C. right away to have your tax issue addressed before the IRS takes collection action and you lose your appeals rights.

LT16 – Overdue Taxes or Tax Return

This letter concerns overdue taxes or an overdue tax return. Receiving an LT16 notice alerts taxpayers that they have outstanding tax obligations or unfiled tax returns.

If you receive an LT16 notice, it’s important to promptly review the details provided and take immediate action to address the issue. The notice should include instructions on how to resolve the issue. Responding to this letter in a timely manner can help you avoid further penalties, interest, and potential collection actions.

LT17 – Use Online Services to Take Action on Balance Due

IRS Notice LT17 is a request to use IRS online services in order to pay your overdue tax balance. It outlines the various options you have to pay your tax bill, including online services, which is the fastest route.

It also outlines the steps you can take if you’re experiencing financial hardship, as well as your rights to appeal. Ignoring LT17 may result in collection actions being taken against you.

Upon receipt of an LT17 notice, taxpayers should consider accessing the IRS’s online portal to explore available options for resolving their tax debt. 

CP40 – Tax Debt Sent to Private Collections

Notice CP40 informs taxpayers with certain outstanding debts that the IRS has assigned your debt to private collections. This means that a private collection agency will contact you on behalf of the government, in order to pursue collection of your outstanding tax debt. 

LT40 – Request for Information from Third Parties

IRS Letter 40 informs the recipient that the IRS is still trying to collect unpaid taxes, and that they may contact third parties in order to collect more information on you.

Your employer, bank, customers, or associates may be contacted as the IRS tries to learn more about your financial situation.

LT38 – Resumption of Collections

This letter is a notice about the resumption of ACS collections by the IRS. During the COVID pandemic, the IRS paused the issuance of collection notices from its Automated Collection System (ACS). In early 2024 this service was resumed, and LT38 letters were issued to those taxpayers who have an outstanding tax debt.

In addition to informing you of the total amount of taxes owed, this letter will also include details on self-service options and payment alternatives available to resolve your account. The LT-38 also tells qualifying taxpayers about penalty relief on late payment penalties for delinquent taxes from 2020 to 2021, but if you don’t respond by a certain date, penalties will start to accrue on these balances again.

CP59 – Unfiled Tax Returns

This notice is sent to taxpayers who have failed to file a prior tax return or returns. It will include information on the steps you can take to file a return and avoid any potential penalties for not filing.

What to Do When You Receive an IRS Notice

Receiving an IRS notice can be unsettling, but it’s crucial to respond promptly in order to avoid penalties, interest, or even collection actions. When you receive a notice from the IRS, the first step is to open it and carefully read over its contents. Pay close attention to the reason for the notice, any deadlines specified, and more importantly, what actions are required on your part.

It’s crucial to understand the purpose of the notice, as IRS notices can vary widely in their intent. They may serve as reminders of unpaid taxes, requests for additional information, or notifications of changes to your tax return. Understanding the nature of the notice will help you determine the appropriate course of action, although they will always include details on steps to take when applicable.

IRS notices typically include clear instructions on how to address the issue outlined in the notice. This may involve making a payment, providing additional documentation, or responding to a specific inquiry. The quicker you can comply with these instructions, the faster you can resolve your issue. 

If you’re unsure how to respond to the IRS notice or need assistance understanding its contents, it may be wise to seek help from a tax professional like those at McLaud Law P.C. They can provide guidance on the appropriate steps to take and help you effectively navigate the IRS’s requirements.

How to Spot a Fake IRS Notice

Unfortunately, IRS scam letters are a reality that many taxpayers have to watch out for. Fake IRS notices are often sent to people in the hope that they might be pressured or threatened into giving money to scammers posing as the IRS or other tax agencies. Sometimes, unscrupulous tax debt relief companies even send out letters that look like they’re from the IRS, but they’re really just advertisements for that company’s services. 

The good news is that there are things to look for that can help you determine whether your IRS notice is legitimate. 

First, a real IRS notice will feature the agency’s official letterhead and logo. You can examine the top of your IRS letter and check to ensure it appears professional and consistent with official IRS correspondence. 

Another step you can take is to double-check the contact information provided within the letter. Look online to confirm that the IRS contact details in your letter are the same as whatever is publicly available. A legitimate IRS notice will provide contact information, including a phone number or address, where you can reach the agency for further assistance. 

One of the easiest ways to spot a fake IRS notice is to pay attention to the language used. The IRS will use grammatically correct, relatively formal language to communicate information to taxpayers. If you’re suspicious of an IRS letter you’ve received, read carefully for spelling errors, grammatical mistakes, or threatening language. While some collection notices can obviously be severe, the IRS will never threaten you with jail time or immediate financial consequences.

Another detail you can look for when trying to spot a scam IRS letter is the notice number, which should be listed on the notice. This number should match official IRS notices listed on its website. Most notices also contain a short URL that directs to an IRS webpage about the notice. 

You can also pay attention to any requests for sensitive personal information, such as a Social Security Number or bank account details. The IRS has no need to request this information from you via mail. This is another easy way to spot a fake IRS letter.

When Does the IRS Send Collection Notices?

The timing of IRS collection notices can vary depending on individual circumstances, as well as the IRS’s own priorities. Generally speaking, the IRS sends collection notices when a taxpayer has unpaid taxes or outstanding tax debt. However, during the COVID-19 pandemic, some IRS collection activities were temporarily suspended, causing delays in the issuance of collection notices.

As the IRS resumes normal operations in 2024, taxpayers may expect to see a ramp-up in collection activities, including the issuance of notices such as LT38. 

This notice alerts taxpayers to the reinstatement of collection efforts for previously suspended tax debt collections. In any case, it’s important to note that taxpayers might not receive notices about tax debts right away. However, once the notices do start coming, they are typically issued on a six-week to eight-week cycle.

Get Help From McLaud Law

If you’ve received an LT38 notice or any other IRS notice and are unsure how to proceed, it can help to seek assistance from a tax professional. At McLaud Law P.C., we can help you navigate the process of tax debt resolution and take some of the weight off of your shoulders while you work to address your tax debt effectively. To learn more, contact us online or give us a call at 585-397-7785 today!

This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between McLaud Law P.C. and the recipient.