No one likes it when the IRS reaches out to them. The agency is like that one neighbor you never liked as a kid who never got the hint and just kept coming over. Chances are, he’s gonna call today too. The IRS sends millions of letters each year to taxpayers who, quite frankly, don’t ever want to hear from them. And even though you don’t even want to listen to their voice, they have a whole lot of crucial stuff to say. So strap in and get ready for a somewhat boring but extremely important ride.
So what’s up with these notices then?
Glad you asked. The IRS sends out these notices for a couple of reasons, some good, some not so good. One of the reasons you got mail from them might be:
- The IRS changed your return.
- The IRS needs additional information from you.
- They have a question about your tax return.
- You are due a larger or smaller return.
- The IRS needs to verify your identity.
- You are being notified of delays in processing your return.
Now, don’t panic once you receive your letter. It’s a treasure trove of information, so make sure you go through it very carefully. Let’s look at ten notices that the IRS might send you.
CP 501/ CP 502
These two are among the most common notices sent out by the IRS. They notify you of any tax debt that’s due. In it, the following will be stated:
- The amount of tax debt that you owe.
- The year from which the tax you owe is from.
- How much interest will accrue if you don’t pay the debt in full.
- The due date by which the debt must be paid.
The letter will also stipulate whatever actions the IRS will take if you don’t clear your debt. To recover it, the IRS will:
- Seize assets such as vehicles or real estate.
- Garnish your checks.
- Put a tax lien on any future tax refunds you might receive.
- Tax levies against other properties.
This notice is sent to remind you of a tax debt you may have overlooked for several years. You see, sometimes the IRS allows people to spread out payments for the debt over several years. However, if you don’t make your payments or fail to contact the IRS to work out an agreement, this notice will be sent to you.
CP 503 is usually considered a form of second notification. The IRS uses this notice to inform you that you have ten days to pay your debt in full. After you receive this notice, pay your debt in full. If you cannot, contact the IRS as soon as you can to make arrangements for a payment plan. Make sure you do because it gets real from here on.
This is the final alert the IRS will send to remind you of your overdue tax debt. It is the last warning, informing you that the agency is ready to garnish your income or seize your assets to recover the debt. They will also be prepared to claim any federal tax refunds you may get in the future.
You will receive this notice if you fail to or are unable to keep up with a prearranged payment agreement. It’s an official statement, stating that you have defaulted on your contract. You will also receive the following information:
- How much you still owe the IRS.
- How much interest has accrued from your tax debt.
- The date by which you must pay your debt in full.
- Any penalties or cancellation of terms for the agreement.
After you break your payment agreement, the IRS will send you this notice, informing you of their intent to garnish your wages and seize your assets. If it’s got to this point, acknowledge the letter by contacting the IRS. This will prevent you from suffering the consequences of defaulting on the agreement. In some instances, the IRS allows taxpayers to start making payments again if they pay a penalty fee for breaking the agreement.
This is the final notice sent by the IRS informing you of the agency’s intent to seize your assets and garnish your income. It reminds you that the agency is totally within its rights to search for any other assets you may own to recover the debt they are owed.
CP 90/ CP 297
You will receive this notice when the IRS is about to take steps to recover your debt. In some cases, the IRS will demand you pay the debt in full within 30 days to avoid the consequences. You will also be informed of your right to appeal. You’re allowed to file a Form 12153 and request an appeal hearing.
The IRS will send this letter to inform you that they are moving ahead and seizing your assets and property. It also tells you that the IRS has the right to sell your assets and use the earnings to clear the debt you owe. The agency will also remind you that at this point, the debt cannot be discharged by filing for bankruptcy.
This letter is a sort of release, informing you that the IRS already took steps to satisfy the debt you owe. It can also be sent after the time the IRS has to recover your debt expires. If the agency made a mistake garnishing you, you will receive this release. It is sent to your employer, bank, and any other associated financial institutions.
If you dispute any of the information in one of these notices, you can contact the IRS and inform them. However, if you don’t, pay as much as you can. It can be done online, or you can apply for an Online Payment Agreement or an Offer In Compromise. You might need the notice in the future, so make sure you keep a copy of it with your tax records.