In any IRS Collection case, there are certain notices the IRS sends out at each stage of the process. If a taxpayer doesn’t pay the tax in full when the tax return is filed, that taxpayer will receive a bill for the amount owed. This starts the collection process, and it will continue until the tax liability is satisfied or the government is not longer able to collect the tax debt.
So what are the notices the IRS must send out? I’m glad you asked.
The first notice in the collection process is a CP501 Notice. This is the friendliest notice from the IRS. It will indicate the taxpayer has a balance due on one of his or her tax accounts. Once a taxpayer has filed the tax return, the taxpayer has 10 days to pay the tax. It not, then a CP501 Notice will automatically be generated and sent to the taxpayer. The best path forward is to pay the tax owed or contact the IRS to set-up a plan to pay the tax.
If the CP501 Notice goes unanswered, then the IRS will send a CP503 Notice. The notice indicates that they IRS has not heard from the you and you still have an unpaid balance on the account. This notice is the second reminder from the IRS. It is a bit more stern in its language in an effort to get the taxpayer to comply.
CP504 Notice – Intent to Levy Notice
The third notice in the collection process is a CP504 Notice – Intent to Levy. This notice is the final attempt by the IRS to get the taxpayer to pay the tax voluntarily (or enter into a payment plan for the tax). While it is a notice of intent to levy, at this point, all the IRS can seize any state tax refund to which you’re entitled. This notice should not be ignored. If you have reached this stage of the collection process, the IRS is “breathing down your neck”. While the IRS can only seize a state tax refund, it is a notice that should not be ignored.
CP90 Notice or Letter 11
A CP90 Notice (issued by IRS Field Collections) or a Letter 11 (issued by the automated collection system) are intent to levy notices that inform you of the IRS’ intent to seize your property or rights to property. Thye are the final notices the IRS must send before it can begin seizing your assets (i.e. diving into your bank account and taking your money). At this point it is imperative that you respond to the notice to begin working with the IRS to resolve the tax issue. There are certain time frames that must be followed to preserve your rights at a taxpayer.
Do not be afraid of a notice from the IRS. They are willing to work with you to get the problem resolved. If you feel intimidated by the IRS or do not want to deal with the maze of regulations and procedures, please contact a Tax Resolution Specialist at Edgewater CPA Group to set-up a consultation to review your case and help get a resolution plan in place.
If you or anyone you know has a tax issue with the Internal Revenue Service or the Indiana Department of Revenue, please schedule a phone or in-person consultation today. Your tax issues won’t go away on their own, but with the help of an experienced Tax Resolution Specialist, you can put your tax problems behind you once and for all.
Patrick H. Wanzer, CPA, CTRS