IRS Tax Collection Notices: How to Interpret and Respond to IRS Letters
The IRS sends out about 170 million tax notices to taxpayers throughout the year to help educate, inform, and guide them on how to best fulfill their tax duties. The agency sends several different collection notices including balance due notices, demands for payments, and intent to levy notices. If you don’t pay or file your taxes, the IRS will reach out to you through the mail.
Receiving an IRS collection notice can be stressful, as it can involve harsh language and threats of action from the IRS. At 20/20 Tax Resolution, we specialize in helping taxpayers understand these notices and take quick action. Whether you are dealing with a notice early in the collection process, like a CP14 notice, or one later on, like an LT11 when a levy is immense, our team is here to guide you through the process and protect your assets. We will work directly with the IRS on your behalf to negotiate a resolution and get you back into tax compliance to prevent further collection actions and to resolve your tax issue for good.
Keep reading to find out more about some of the most common notices the IRS sends out and how you should handle them below.
Table of Contents
- CP14 Notice: First Notice of a Balance Due
- CP14IA: Balance Due With Installment Agreement
- CP 501: Reminder Balance Due
- CP503 Notice: Second Request Notice
- CP504: Final Notice and IRS Intent to Levy
- CP523: Intent to Terminate Installment Agreement
- CP59: Haven’t Filed Tax Returns
- CP77 Notice: Final Notice of Intent to Levy and Notice of Your Right to Hearing
- CP90: Intent to Seize Assets and Right to a Hearing
- CP40: Account Assigned to Private Collection Agency
- CP140: Account Assigned to a Collection Agency
- CP508C: Revocation or Denial of Passport
- LT1058: Intent to Levy and Right to Hearing
- LT11: Intent to Seize Your Property
- LT16: Overdue Taxes or Tax Returns
- LT17: Use Online Services to Take Action on Balance Due
IRS CP14 Notice: First Notice of a Balance Due
One of the most common notices the IRS sends out is a CP14 letter. You will receive this notice if you owe back taxes to the IRS. Your balance due may be the result of filing your taxes and not paying the full amount you owe. However, you may also receive this letter if the IRS corrected an error on your tax return that led to a balance due.
If you don’t respond to the CP14, late payment and interest penalties will accrue on your account, and the IRS will prepare to move on to the next step in the collections process. To avoid unwanted collection actions, contact the IRS to set up a payment plan as soon as possible after you receive this letter. If you cannot afford a payment plan, contact a tax pro to talk about other relief options.
CP14IA: Balance Due with Installment Agreement (IA)
The CP14IA is a balance-due notice that the IRS sends to people who have active installment agreements or who have recently applied for installment agreements.
An installment agreement is where you agree to make monthly payments, and the IRS agrees not to pursue collection efforts against you and your account. The IRS may use the CP14IA to remind you of your balance due, even if you are already making payments. If you have recently applied for a payment plan, the IRS may outline additional steps you need to take.
For example, your CP14IA may tell you to file a Form 433-F Collection Information Statement. Alternatively, it may ask you to file unfiled returns, as you cannot set up a payment plan until you are compliant with filing obligations.
Because this notice contains different instructions in different situations, review it carefully to make sure you understand what this IRS wants. If this notice is related to a tax debt that is not part of your installment agreement, make arrangements to pay in full as soon as possible, or contact the IRS to ask if you can roll the new balance into your existing payment plan.
Remember, incurring new tax debt violates the terms of your installment agreement, and if the IRS terminates your installment agreement, you will owe the balance in full. If you’re not sure what to do about your current balance, then reach out to a tax resolution specialist as soon as you can.
CP501 Notice: Reminder of Balance Due
An IRS CP501 notice is an official letter designed to inform you about a current balance due on your tax account. The letter outlines exactly how much you owe in tax, interest, and penalties, and it explains how to make payment arrangements.
If you don’t agree with the balance due, contact the IRS about the mistake, or if applicable, consider filing an amended return. Whether you agree or disagree with the balance due, you need to respond to this letter to avoid getting hit with penalties and accruing more interest on your tax debt. Additionally, if you don’t take action, then the IRS will move on to the next step in the collection process.
The best way to address this letter is to pay off what you owe in full or arrange a payment plan. If you have limited income and assets, you may want to consider negotiating an offer in compromise or applying for financial hardship status. A tax resolution expert can help you make an informed decision on how to handle your CP501 notice if you’re not sure what to do.
CP503 Notice: Second Request Notice Balance Due
The CP503 notice alerts you that you still have a balance owed on your tax account and the IRS has already attempted to reach out to you. This letter expressly states that you did not respond to the first notice, and it warns that the IRS may take collection actions against you.
If you get a CP503 letter, then you need to pay or make arrangements with the IRS. Paying off what you owe in full is the most effective way to prevent any more interest or penalties from accruing on your account, but if that’s not possible, you can consider an installment agreement or a relief option based on your financial situation.
Timely action is even more crucial with this second notice. Your CP503 letter will include a due date. If no action is taken by the due date, you will face additional consequences. Contact a tax specialist or get in touch with the IRS directly before the due date to minimize penalties and avoid unwanted consuquences.
CP504: A Final Notice and IRS Intent to Levy
The CP504 notice informs you about the IRS’s right to pursue a levy against you. An IRS levy allows the IRS to take your assets to fulfill your tax debt. The CP504 explains that the IRS has the right to garnish your wages or seize your real or personal property. But, at this point, the agency is only going to seize your state tax refund.
Before garnishing your wages or taking other assets, the agency must send you an additional levy notice that also outlines your right to a hearing. However, that doesn’t mean you should ignore Notice CP504. To protect your assets, you must contact the IRS as soon as possible.
The most popular resolution option is to set up an installment agreement, but depending on the situation, you may be able to get an offer in compromise or stop collection actions through currently not collectible status.
CP523: Intent to Terminate Installment Agreement (IA)
An IRS CP523 letter informs you that your IRS installment agreement is in default and subject to termination. When you enter into an installment agreement, you and the IRS agree to legally binding terms. You agree to pay off what you owe in monthly intervals, and the IRS agrees not to continue pursuing collections. Missing even one payment can lead to the termination of your entire agreement.
CP523 says that the IRS can seize your assets if you don’t pay your tax bill, but it usually gives you the opportunity to catch up on missed payments. Note the deadline on the letter and make sure that you make a payment by that date. If you don’t, your agreement will be terminated, and the IRS will start collections against you.
If you need to modify your installment agreement, contact the IRS by the deadline. Depending on the situation, the IRS may let you reduce your monthly payments, make payments over a longer time frame, or change your payment date. Don’t let your installment agreement go into default. If you have had a recent default on a payment plan, the IRS requires a lot more financial information when you apply for a new payment plan, and defaults in the last two years can reduce your chances of success.
CP59: Haven’t Filed Tax Returns – Take Action
A CP59 notice informs you that the IRS did not receive your individual income tax return for a prior tax year. The letter explains that the IRS believes you were supposed to file based on income documents received from third parties or other information the agency has obtained.
This notice generally comes with response Form 15103. You can use this form to let the IRS know that you have already filed a return or to explain why you don’t have to file. This form also has a section where you can note if you received CP59 on behalf of someone who is deceased.
If you have not filed a return and are required to do so, then, you should file as soon as possible after receiving the CP59. Filing promptly can help to minimize the penalties you will face. If you ignore this notice and don’t file a return, the IRS may assess taxes against you and attempt to collect them involuntarily.
CP77 Notice: A Final Notice of Intent to Levy and Right to Hearing
If you don’t respond to the IRS’s other collection attempts, the agency will send you a CP77 or a similar final intent-to-levy notice. The CP77 explains that the IRS may seize your wages, bank accounts, or other assets if you don’t pay your taxes. It also informs you of your right to request a Collection Due Process (CDP) hearing.
You have 30 days to request a CDP hearing. The hearing provides you with the opportunity to appeal the levy and suggest alternative solutions such as an installment agreement. If you don’t take action by the deadline, the IRS can move forward with the levy which may include wage garnishment or money being taken from your bank account. You can appeal collection actions through an equivalent hearing after the 30-day deadline, but at that point, the levy may already be underway.
CP90: Intent to Seize Assets and Right to a Hearing
Another intent to levy notice, the CP90 means that the situation has escalated to the point where the IRS has decided to seize your assets. The letter also informs you that you have a right to request a Collection Due Process (CDP) hearing if you disagree with the proposed asset levy.
You should never receive a CP90 letter unexpectedly. Typically, you will receive multiple notices from the IRS first, which all explain that you have a past due balance. However, even at this point, you can avoid wage garnishment or asset levies if you act quickly. Contact the IRS to set up payments or request a CDP hearing by the due date.
If you don’t take action by the deadline on the letter, you risk the IRS coming after your wages or assets. It’s always easier to avoid a levy proactively than it is to stop a levy once it’s in place. If you’ve received this notice, a tax resolution specialist can help you identity the right option for your situation.
CP40: Your Account Assigned to Private Collection Agency
The IRS works with private collection agencies when taxpayers have an overdue balance and one of the following applies to the tax account:
- The IRS can’t locate you due to a lack of information.
- You haven’t contacted the IRS and at least a year has passed.
- More than 2 years have passed since your last tax assessment
If you meet these conditions, then the IRS may send you a CP40 letter to let you know that they’re transferring your account to a private collection agency. The letter will include the name of the private collection agency and your taxpayer authentication number. You’ll need to provide this number to the debt collection agency when they get in touch with you – it allows you to ensure that you’re talking to a legitimate collector.
Instead of working with the IRS, you’ll work with the debt collector to set up a payment plan. Unfortunately, collectors have limited authority to resolve tax problems, and they cannot help with offers in compromise or currently not collectible status. If you don’t want to work with the collection agency, you can request to have your account returned to the IRS.
CP140: Your Account Assigned to a Collection Agency
An IRS CP140 notice also informs you that your IRS tax debt has been assigned to a private collection agency. Save this letter because it includes a taxpayer authentication number.
When the private debt collection agency gets in touch with you, they will ask you to provide the first few numbers of the authentication code. Then, they will provide you with the last five digits. This method is used to verify your identity and ensure that both parties are legitimate.
If you can’t pay off your full tax debt at one time, then you can work with the private debt collection agency to create a payment plan. If you prefer to work with the IRS, you can request to have your account sent back to the IRS, and if you do so, the collection agency must cease all contact with you.
CP508C: Revocation or Denial of Passport For Taxes
An IRS CP508C notice informs you that your tax account has met the threshold for being considered “seriously delinquent” under IRS terms. That means that your details will be provided to the U.S. Department of State, and you will lose the right to use or renew your U.S. passport.
In other words, you will not be able to travel internationally until you resolve your tax debt. If you are out of the country, you will be allowed back in, but then, you will not be able to leave until you rectify this issue. By the time you receive CP508C, the State Department has already been notified about the tax debt.
To regain the right to use your passport, you must pay the debt in full, prove that the certification was done in error, establish that the debt is no longer legally enforceable, or show that the IRS did not follow the right procedures. For example, the IRS must file a federal tax lien before certifying your debt with the State Department.
As of 2024, seriously delinquent tax debt is anything over $62,000. If you get your balance below this level before the IRS certifies your debt to the State Department, you can avoid losing your passport, but once the State Department is involved, you cannot get your passport back by making a payment to get under the threshold. However, you can reclaim your international traveling privileges by setting up a payment plan, applying for an offer in compromise, or requesting innocent spouse relief.
LT1058: Letter of Intent to Levy and Right to Hearing
IRS LT1058 states the IRS’s clear intent to seize your property or rights to property. It also outlines your right to a hearing. If you don’t pay your taxes, the IRS can levy your bank accounts, wages, cars, investment accounts, tax refunds, and even Social Security benefits. However, you have the right to appeal the levy and suggest alternative payment arrangements.
The 1058 letter requires immediate action on your part if you want to keep your property or assets safe from a levy. If you do not take action by the deadline, the IRS will proceed with the levy. Even if you have ignored every other IRS notice, you should not ignore this notice.
LT11: Final Intent to Seize Property and Right to Hearing
Taxpayers can expect to receive an IRS LT11 notice if they have an outstanding tax balance, have not responded to previous letters about their delinquency, and the IRS has moved on in the process. The LT11 notice explains that the IRS has decided to proceed with seizing your property or property rights.
Like other intent-to-levy notices, this notice also explains your right to a hearing, but you only have 30 days to stop the levy. If you don’t take action, the IRS can seize wages, bank accounts, and other assets. If you get this notice, you need to get in touch with either a tax professional or the IRS directly as soon as possible. Otherwise, your assets will remain at risk and could be seized by the tax agency.
LT16: Overdue Taxes or Unfiled Tax Returns
An IRS LT16 notice is an informative letter stating that you have unfiled returns or overdue taxes that the IRS wants to collect from your account. In order to comply with the IRS, you may need to file overdue taxes or pay off a past tax balance.
If you’re unable to pay off everything in full right away, then it’s a good idea to talk to a tax resolution as soon as possible about your options. Depending on your circumstances, you might be able to resolve your tax situation by:
- Agreeing to payment plan with the IRS
- Negotiating an offer in compromise agreement
- Applying for financial hardship status
The last thing you want to do, though, is ignore this letter. If you don’t respond to the IRS, then they’ll continue attempting to contact you, increase the penalties on your account, and eventually move on to more significant collection efforts. These efforts could range from taking a portion of your paycheck to seizing your home in extreme cases.
LT17: Use Online Services to Take Action on Tax Balance Due
LT17 is a friendly letter from the IRS that explains that you owe a tax balance. This letter outlines your appeal rights, the possibility of filing for financial hardship status, and how to pay off your balance if you’re able.
If you get this notice, then your best choice is to pay off as much of your balance as possible. If you can’t pay off everything, you might be able to arrange a payment plan or negotiate your balance down. This letter explains how to set up payments online. You can also use your IRS online account to check your balance due or payments made.
Get Help Handling IRS Collection Notices
Having an in-depth knowledge of all the different types of IRS tax collection notices will only take you so far. You also need to know how to handle the notices in a way that benefits you and keeps you in good standing with the IRS.
If you’re not sure how to handle your current tax situation and you’ve received one of the notices above, then it’s time to talk to a tax resolution specialist about what you’re going through. Here at 20/20 Tax Resolution, our team’s compassionate approach to tax resolution is unlike any tax help you’ve sought out in the past. We’ll go to bat for you and help you deal with the IRS.
Schedule your free, initial 20-minute call with the team at 20/20 Tax Resolution now by leaving your details on our online contact form. One of our representatives will reach out to you with the next steps as soon as possible.