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List of IRS Notices LifeBack Tax
The Internal Revenue Service sends various collection notices each year. IRS notices can be intimidating to read and difficult to tell apart. Below, we will list some common IRS notices, what each one means, and how severe they are.
CP01: Identity Theft
A CP01 is sent when a taxpayer reports identity theft to the IRS. This notice indicates that the IRS has confirmed the taxpayer's claim of identity theft, and is now monitoring their account to prevent further incidents. The taxpayer does not need to take any other action.
CP05/CP05A: Return Undergoing Review
This notice indicates that the IRS is reviewing a taxpayer's return for errors, and their tax refund is being withheld in the meantime. This notice is not a cause for alarm, as the IRS randomly selects returns for review each year. CP05 does not require a response, while CP05A requests supporting documentation for one or more items on the taxpayer's return. If the IRS finds the return suspicious, they may select it for a full audit. Otherwise, they will send the taxpayer their refund within 4 to 6 weeks.
CP11: Math Error, Balance Due
A CP11 notice, or a "math error" notice, indicates that the IRS corrected a calculation error on the taxpayer's Form 1040 income tax return, and as a result, the taxpayer has a balance due. This provides 60 days for the taxpayer to pay the balance on the notice, contact the IRS to make arrangements, or appeal the changes.
CP12/CP13: Math Error, No Balance Due
If you receive a CP12 or a CP13 notice, you can sigh in relief. Similar to a CP11 notice, CP12 and CP13 notices indicate that the IRS corrected a math error on the taxpayer's income return, but doesn't need further payments. Instead, CP12 indicates that the taxpayer is due a refund because of the error, while CP13 indicates that the taxpayer has a zero balance. For either notice, you are in good standing with the IRS, and there is no need to respond unless you disagree with the change to your return.
CP14: Balance Due, No Math Error
This is a notice and demand indicating that a taxpayer underpaid on their Form 1040 tax return and has a balance due. A CP14 gives the taxpayer 21 days to pay the indicated balance, or 10 days if the taxpayer owes more than $100,000. If the taxpayer does not pay or contact the IRS within the deadline, then penalties and interest continue accruing on their balance, and the IRS may take further action. If you have received a CP14 and are unable to pay your balance, please contact us as soon as possible, and we at LifeBack Tax will be happy to assist you with the IRS.
CP23: Discrepancy in Estimated Tax Payments, Balance Due
This notice means the IRS adjusted the taxpayer's return because the estimated tax payments they reported don't match the payments the IRS received, and the taxpayer now owes additional tax. A CP23 usually gives the taxpayer 21 days to pay their balance, including late penalties. The taxpayer also has 60 days to dispute the changes. If the balance is not paid by the deadline, penalties and interest continue accruing on the taxpayer's balance.
CP24/CP25: Discrepancy in Estimated Tax Payments, No Balance Due
These notices mean the IRS adjusted the taxpayer's return because the taxpayer reported estimated tax payments didn't match the payments the IRS received, but the taxpayer doesn't owe any additional tax. CP24 means the taxpayer is due a refund, while CP25 means the taxpayer has a zero balance.
CP59/CP259: Tax Return Not Filed
A CP59 or a CP259 notice indicates that the IRS has not received the taxpayer's return. CP59 is sent for missing individual returns, while CP259 is sent for missing business returns. If the taxpayer was required to file a return, they may owe failure-to-file penalties, as well as late payment penalties and interest on any unpaid taxes. If you have received a CP59 or CP259 notice, we at LifeBack Tax can assist you in filing past due tax returns.
CP71: Annual Reminder of Balance Due
This notice is sent annually to remind a taxpayer of their balance due. However, CP71 is simply a reminder notice and not necessarily a demand for payment. The IRS is required by law to send a balance notice each year to any taxpayers with a balance due, including taxpayers who have entered an installment agreement or have been designated with uncollectible status.
CP90: Final Notice of Intent to Levy
CP90 is an official notice of levy and a final demand for payment. This notice warns that because the taxpayer has failed to pay their balance in full, the IRS intends to levy (seize) the taxpayer's property unless the taxpayer pays their balance immediately. After 30 days, if the taxpayer still has not paid in full, the IRS is authorized to levy the taxpayer's property, including income, bank assets, and personal property. CP90 also informs the taxpayer of their right to appeal the seizure by requesting a Collection Due Process hearing within 30 days.
A Final Notice of Intent to Levy is by far the most dangerous IRS notice that a taxpayer can receive. The IRS may seize the taxpayer's wages, bank accounts, car, house, or other equitable assets as collateral. Additionally, unless the balance is paid within 10 days of receiving a CP90, the failure-to-pay penalty rate increases to 1% percent per month. If the IRS has served you with a CP90, please contact us immediately, and we at LifeBack Tax will help you throughout the appeals process.
CP161: Notice of Unpaid Balance and Request for Payment
A CP161 notice indicates that a taxpayer underpaid their taxes and owes a balance to the IRS. Like a CP14, this notice and demand gives the taxpayer 21 or 10 days to pay their balance. If the balance is not paid by the deadline, then interest resumes accruing on their balance, and a statutory (silent) tax lien automatically arises against the taxpayer, allowing the IRS to take further action. If you have received a CP161 and anticipate difficulty in paying your balance, we at LifeBack Tax can provide assistance.
CP501: Notice of Balance Due
A CP501 notice indicates that a taxpayer owes a past due balance to the IRS, and demands payment within the next 21 or 10 days. This is the first of several escalating IRS notices sent after the initial Notice and Demand, usually sent as a reminder if a taxpayer failed to reply to a CP14 or CP161 notice. A CP501 also warns that if the taxpayer does not pay their balance in full or respond within the deadline, the IRS may file a public Notice of Federal Tax Lien (NFTL) on their assets.
A NFTL publicly announces that the IRS has a claim to the taxpayer's assets. It can enter public records for up to 7 years, and hinders the taxpayer's ability to sell their property or to obtain loans. If you have received a CP501, we encourage you to contact us as soon as possible.
CP503: Balance Due, Urgent Reminder
A CP503 notice is sent when a taxpayer fails to pay their balance or respond to a CP501 notice. It again reminds the taxpayer of their unpaid balance and demands payment within 10 days. The CP503 notice again reminds the taxpayer that the IRS may file a public NFTL on the taxpayer's assets if they do not take appropriate steps to resolve their balance.
CP504: Balance Due, Intent to Levy
A CP504 notice is a final notice and demand sent when a taxpayer still fails to pay or respond to a CP503. It once again reminds the taxpayer of their unpaid tax debt and demands payment immediately. CP504 is also a levy notice that warns if the taxpayer still fails to respond, the IRS may file an NFTL or levy (seize) the taxpayer's state tax refund and other property.
CP504 is a very dangerous notice to receive from the IRS. 10 days after receiving a CP504, your failure-to-pay penalties increase from 0.5% per month to 1% to month. If you still owe a balance 30 days after receiving a CP504, the IRS is automatically authorized to seize your state tax refund. (Note that the IRS generally must send a CP90 notice before levying other property, such as wages or bank accounts.) If you have received a CP504 notice, please contact us as soon as possible, and we can assist you in your struggle with the IRS.
CP523: Installment Agreement Default Notice
A CP523 notice indicates that a taxpayer failed to make a required payment on time under their installment agreement, and is now in default. This notice demands that the taxpayer pay 30 days, or the IRS will terminate the agreement and seek collection of the taxpayer's full liability. CP523 is also a levy notice which warns that if the taxpayer does not respond, the IRS may file an NFTL or levy the taxpayer's property, wages, and bank accounts. The taxpayer has a right to appeal the proposed levy.
CP523 can be especially dire for a taxpayer whose financial situation required them to enter an IRS installment agreement in the first place. If the taxpayer does not pay the amount within 30 days, the IRS terminates their agreement, giving taxpayer an additional 45 days to appeal the termination. 90 days after the CP523 notice, the IRS is authorized to enforce collection by filing an NFTL or seizing the taxpayer's assets. If you have received a CP523 and are unable to pay, please reach out to us, and we will assist you in reinstating your installment agreement.
CP2000: Proposed Adjustment, Underreporting Inquiry
This notice indicates that the IRS received information that conflicts your tax return and plans to adjust your return accordingly, which may affect your tax. In many cases, the IRS believes you underreported your income on your tax return and will owe tax due to the changes. CP2000 requests that you reply within the deadline either to accept the changes and pay any tax owed, or disagree and provide supporting documentation explaining why.
If you agree that you owe a balance but are unable to pay in full, you may also request an installment agreement in your response. If you don't reply within the deadline, the IRS will apply the changes to your return and assess any tax you owe as a result.
CP3219A: Notice of Deficiency
This notice indicates that the IRS intends to assess additional tax against you because they received information that conflicts with your tax return. You have 90 days to reply by agreeing with the adjustment to your account, or to dispute the adjustment by filing a petition with the U.S. Tax Court. Usually sent after CP2000 or a similar notice, CP3219A is the last notice sent before the IRS officially assesses taxes against you.
The IRS cannot extend the 90-day time limit for petitioning the tax court. If you don't reply to the IRS or petition the Tax Court in time, the IRS will apply the adjustments to your tax account and bill you for any tax owed, as well as penalties and interest.
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