IRS Collection Notices: What do they mean?

The IRS’s primary job is to collect taxes and one of their tools for doing this is sending out collection notices. IRS collection notices serve two purposes:

• they inform the taxpayer the amount that is owed and
• the date by which payment is due

If you don't respond or make a payment within a certain number of days after receiving the notice, then the IRS may take more aggressive actions, such as filing a tax lien, wage garnishment or seizing your assets.

Types of IRS Collection Notices

Each notice is issued regularly, usually about 4-5 weeks apart, along with escalating threats of collection action. Here is the normal sequence of notices:

1. CP 14 Notice Balance Due
2. CP 501 Notice Reminder, We Show You Still Owe
3. CP 503 Notice Important – Immediate Action Required
4. CP 504 Notice Urgent Notice – We Intend to Levy on Certain Assets, Please Respond Now
5. CP 90/CP 297 Notice Final Notice of Intent to Levy and Notice of Your Right to a Hearing

 What these IRS Collection Notices Mean

The first three notices are reminders to taxpayer of what is due the IRS, while the last two notices threaten IRS action, first with seizing state tax refunds (CP 504) then with seizing other assets such as bank accounts and wages (CP90/297) or social security benefits (CP91/298).

What To Do When You Receive an IRS Collection Notice

When you receive an IRS collection notice, it is important to take immediate action. The first thing you should not do is ignore the notice. If you do, the IRS will start collection proceedings against you. The second thing you should not do is panic.  Stay calm and read the notice. It is important to review the information on the notice carefully for accuracy. Check all your tax records and make sure that you are not missing any relevant income or expenses. If there are mistakes, then write down what they should be instead, including supporting documents if necessary.

If the notice asks you to call a specific phone number or sends you instructions on how to respond, please do so as soon as possible. If not, don't panic and start writing letters just yet because you may write something that may put you in deeper trouble than you already are in. It's always good to reply to these notices after consulting with a tax resolution expert.

Green Krist, CPA  specializes in assisting taxpayers with IRS and North Carolina Department of Revenue issues in the greater Raleigh, North Carolina area.