You Received an IRS Notice, What Now? | Flat Fee Tax Service | San Diego
Updated: Jun 15
Have You Received an IRS Notice? What Should You Do?
One of the most frightening things you could receive in the mail is the "dreaded" IRS Notice. You just know it isn't going to be "good news." The notice sent by the IRS will get your heart racing even before you get the envelope opened. Many people will never open the notice because they are frightened and don't want the bad news. You may feel unsure about what your next move should be or what tax relief solutions may be available to you. The IRS does have tools available that taxpayers can utilize for IRS tax help, even if they received a notice that makes it unclear what their next steps would be. Below we list the most common collection notices sent out to taxpayers every year.
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If you’ve received a CP501 notice, it means that the IRS is attempting to notify you of a past balance due. The IRS will request that you take action in order to resolve your outstanding balance. A CP502 notice also doubles as a reminder that the IRS is notifying you of your tax balance. Every IRS notice indicates the interest and penalties that have accrued in addition to what you owe to the IRS.
If you receive these types of notices, the IRS is letting you know of what the current balance, including interest and penalties. In other words,this is your tax debt. Once you confirm that the balance is accurate, you can either pay the balance for the tax year in question, contact the IRS to get set up in an Installment Agreement, request a penalty abatement, be declared Currently not Collectible or settle the tax debt through an Offer in Compromise. Those are your choices.
A CP504 notice is a secondary notice that the IRS will send to alert you of your tax debt if you owe a tax balance. This IRS notice is to also notify you that they’re preparing to start collection action and to seize any tax refund you may have received. The IRS will continue their collection action against a taxpayer until the tax debt is paid in full.
To avoid the IRS sending you into collections, you must "do something." It is important to stay compliant which means that your tax returns have been filed. You can pay off your balance in full with the IRS but that probably is not an option for most people. You could be placed into an IRS installment agreement. You can settle the tax debt if you are eligible. It is also paramount that you continue to monitor your mail to ensure that you don’t receive any further notices from the IRS. If you have representation, your tax professional will receive a copy of every notice and can answer each notice immediately.
An LT11 is an IRS notice to remind a taxpayer that they have an overdue payment for an overdue tax debt.
The IRS will send a CP90 notice if they have attempted to reach out to a taxpayer multiple times about their tax balance and have yet to receive a response. The letter states that the IRS has the intent to seize a taxpayer’s property or rights to their property if they fail to resolve their outstanding balance.
Both of these IRS notices are a warning that the agency is very serious and will begin to take enforcement action against the taxpayer and it is up to the taxpayer to either continue to stay in collections with the IRS or settle their tax debt and get compliant. At this point in time, it is vital that you attempt to rectify the situation and get help with the tax debt. A tax professional can contact the IRS immediately to have a hold placed on your case. This provides the time time necessary to not only save your paycheck and/or bank account to IRS seizure but to provide the breathing room to put together your tax settlement.