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What Do All the Different Notices Mean?

Author: Keith Huggett

Once tax season is over, the IRS spends its time contacting those taxpayers and business owners who failed to pay their taxes. Throughout the collection process, several notices will be mailed to delinquent taxpayers from the IRS.  Please be aware that the IRS communicates SOLELY through the U.S. Postal Service.  If you receive emails or telephone calls from someone claiming to be from the IRS you should report this contact to the Treasury Inspector General for Tax Administration at 1.800.366.4484.  You can file a complaint using the FTC Complaint Assistant; choose “Other” and then “Imposter Scams.” If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes.

However, if you receive a communication from the IRS it is critically important to open the correspondence as soon as you receive it and determine what the IRS is contacting you about.  While the majority of communications are regarding an error with your tax return, if you owe back taxes the IRS issues collection letters in this order:

CP 14 - Balance Due, No Math Error

The CP 14 shows the underpaid tax according to IRS records. The notice shows the tax reported on the return, the payments the IRS applied to your account, and the remaining underpayment they have calculated.  Additional interest and penalties may accrue if the balance is not paid in full by the due date. If you do not agree with the additional tax due, a response should be made to the IRS as soon as possible to settle the issue with your account.  An example of a CP 14 can be found here.

IRS Notice CP 501/CP 502 - Balance Due Reminder Notice

The CP 501 is the first reminder notice that you have a balance due on a tax account. The IRS has previously sent a notice about a balance due on a tax account. This reminder notice alerts you that there is an outstanding balance and, if not paid within 10 days, the possible actions the IRS may take. If you don’t pay or arrange an installment agreement the IRS may file a Notice of Federal Tax Lien.

CP 503: IRS Second Notice of Balance Due - Meaning & Actions Needed

The CP 503 is a reminder and a means to collect on a balance that the tax payer still owes. This letter is a final notice and follows previous attempts to receive payment. When you receive this letter it is important for you to read it carefully and to reply immediately because if you don’t, the IRS could take action against.

IRS Notice CP 504 - Final Notice - Balance Due

This is the final notice that you will receive from the IRS prior to the IRS fulfilling their intention to levy or take your state tax refunds. The CP 504 will clearly state the IRS's intention to levy your refund or other property.  The notice will also have a coupon at the bottom or end of the notice to include with your payment. 

CP 297 - Notice Of Intent To Levy And Notice Of Your Right To A Hearing & CP 90 - Final Notice - Notice Of Intent To Levy And Notice Of Your Right To A Hearing

The IRS will send out CP 297 before CP 90. The IRS sends CP 297 to notify you of their intent to levy your accounts and property.  There is a balance due on your tax account and several notifications of the balance due have been sent.

The IRS sends a CP 90 to inform the recipient that the amount is still due, that the IRS intends to levy on certain assets, and what steps you need to take within 30 days to prevent the IRS from taking this action.

CP 91 - Final Notice Before Levy on Social Security Benefits

The IRS sends CP 91 to inform the recipient of our intent to levy on their Social Security Benefits. If payment has not been made, or a payment plan arranged, the IRS will take up to 15% of your Social Security Benefits to pay it, and what steps you need to take within 30 days to prevent this action. 

You should also be aware that you have the right to retain an authorized representative of your choice to represent you in your dealings with the IRS. You do not have to face the IRS alone.  When you receive a notice from the IRS, it is in your best interest to contact a qualified tax professional to represent you in front of the IRS. Either your or your tax representative have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position. Lastly, you are also entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. To see a complete list of your rights, the IRS has provided a "Taxpayer Bill of Rights."

For questions relating to back taxes, collection notices, or any other tax matter, Contact the Tax Office, Inc., for a free, no obligation evaluation of your tax situation.

IRS Notices Involving Your Tax Return

Author: Keith Huggett

It's deep into tax time now, and the IRS has been busy processing your returns. During the processing the IRS becomes aware of issues, if any, that arise with your return. It's at this time that certain notifications get sent out via the United States Postal Service. The IRS does not use email to communicate with taxpayers. The IRS has classified their notices by the type of tax form that they refer to. Simply put, any notices involving personal taxes, forms 1040, 1040A, 1040EZ, and their supplemental documentation, schedules, and forms are called individual filer notices. If the forms involved are IRS forms 941, 1065 or 1120 then the notices fall under the business filer category.

The IRS sends out millions of notices every year. Each letter will tell you what the letter is for, and why they are sending it to you. It is important to read these letters as soon as you receive them. The IRS often includes a "respond by" date in these notices. If you do not respond by the given date, it can, and often does, cause issues for you in the future. While receiving that initial notice from the IRS is intimidating, quite often the correspondence is due to a simple question that requires an answer. Your inital actions should be to read the notice, make a copy of it, and send it to your tax preparer for action.

Here are some of the notices you might receive from the IRS:

• CP05A - The IRS is examining your return and requires documentation.
• CP08  - You may qualify for the Additional Child Tax Credit and may be entitled to some additional money. 
• CP09 - The IRS records indicate that you may qualify for the Earned Income Credit but did not claim it.
• CP10 - The IRS has made a change on your tax return because they believe there is a miscalculation affecting your estimated tax payment you wanted applied to your taxes for next year.
• CP11 - The IRS has made a change on your tax return because they believe there is a micalculation affecting your return. You now owe the IRS due to this change.

There are many, many more notices that can be sent out by the IRS. The above lists only a few. The important issue to be aware of is that all of the issues shown above are easily taken care of. While it is true that not all IRS notices are so easy to take care of, if acted upon when first received your tax issue will be less complicated to take care of.

Remember, when dealing with IRS correspondence, following the directions that is provided for you is key to correcting the situation.  Each letter will provide you with the information that the IRS requires from you.  Be prompt in your response. Only give them what they ask for, nothing more or less. Keep copies of the notices for your records.

If you are uncomfortable dealing with the IRS in any way, contact your tax preparer. A professional tax service is ultimately qualified to deal with the IRS for you.  Tax specialists are trained to communicate with the IRS directly in your favor. Should you have any questions regarding IRS notices, contact us, The Tax Office, Inc. We will be happy to assist you.