CP14 or other IRS collection notices: What if I can’t pay?
Contrary to what taxpayers like to hear when the IRS is mentioned, notices in their millions have been rolled-out due to underpayment. If you’re one of the unlucky many to receive this, the letter is labeled CP14. Unfortunately, this cannot be ignored for two primary reasons.
Firstly, the reason you may have received the CP14 notice could be due to an outstanding balance on 2021 tax returns. However, do not worry if payments have already been taken from your bank account. As it currently stands, there is a system-wide problem causing the notice to be sent out by mistake.
Secondly, it’s possible that when you obtain the notice, it’s legitimate. If this is the case, then failure to take the appropriate action can lead to penalties and interests, which will occur 21 days after. The CP14 is the first stage response requiring a payment to be made to the IRS. If you decide to ignore it, you could face the following: bank levies, income source levies, wage garnishment, or lien filings.
Now, let’s quickly go over the IRS collection process. It begins by assessing current tax. Following the result, the 10-year collection statute is activated. Although, if any tolling events have occurred, then the statute will be extended.
The initial response that taxpayers receive that asks for the collection of an outstanding balance because of unpaid taxes is somewhat soft. However, the CP14 will state that if debts aren’t settled within 30 days, more notices will follow. The next stage letters consist of CP501 (You have a balance due), and CP503 (Immediate Action is Needed).
If none of these are dealt with, CP504 is sent saying the IRS will look to seize properties or property rights, causing a threat to levy. There is a 30-day period once you’ve received this notice of right to appeal the IRS assessment. If an agreement hasn’t been made after 30 days, what is known as Letter 11 or CP90 (Final Notice) will be issued. These notices are the final ones right before the actual levy enforcement actions.
Therefore, if the balance isn’t settled in full or to the agreed-upon amount, the consequence can include wage garnishment, bank accounts levies, freezing of personal income or business assets, for example, companies that process credit cards. Furthermore, the IRS will issue a Notice of Federal Tax Lien, although this may be applied earlier on.
What not to do when you receive a collection notice?
First, the worst thing to do is to put it to the side and hope the problem goes away. There is a good percentage of errors on the IRS notices, but you still must check with them. Plus, you need to respond to claim your money back if anything is owed to you. However, if they are any collection notices and you don’t make any response for a while, the IRS will proceed to take enforcement actions, which include taking away your money and income sources.
The next worst thing is to call the IRS by yourself and spill all your information. The IRS agents or Revenue Officers often start by being nice to you because their job is to collect your financial information. This information will be used against you to end up with a disadvantageous offer or a payment required that’s higher than necessary.
In the circumstance where the IRS approaches you for back taxes, it’s easy to start worrying, however, there are solutions when the right approach is found.
At Ace Plus Tax resolution, a tax relief specialist and CPA, James Cha recommends the first task when facing this scenario is to look for tax relief options that can be utilized. Although, these options can only be used once delinquent tax returns have been completed, and any outstanding current income tax and payroll tax deposits have been paid.
One option available, if entities or individuals qualify, is called an Offer in Compromise. The benefit of this resolution is that the outstanding tax balance that needs to be paid is settled to a greatly reduced amount that both sides agree on. This option is put forward when the person or entity cannot afford to pay the full amount based on financial inability. However, to ensure they’re accepted, the relevant financial documents and statements must be provided to verify their position.
Another possible solution is the Installment Agreement which businesses and individuals can apply for. This helps create an affordable payment plan until the back taxes have been paid either in full or partially. There’s also the chance that a ‘Partial’ payment plan will be offered, which means the full balance won’t need to be paid. Instead, the remaining amount after the end of the payment term under this plan is forgiven by the IRS. To capitalize on the best outcome, a careful strategy must be created when the application is negotiated.
Currently Not Collectible status is possible in some cases, preventing the IRS from collecting assets and income for taxes not paid. However, to qualify, individuals must show their financial health is poor, mainly due to little to zero monthly disposable income. When this happens, the IRS will stop any attempts to receive payments until their financial situation has significantly improved.
Last but not least, business owners that are behind on Payroll Tax Obligations must realize its seriousness. If you don’t respond to the series of IRS letters, the IRS can come after you personally, apply liens, levy your bank accounts, confiscate your receivables and seize your income sources and property in an attempt to collect payment. They can even close your business. Payroll tax delinquency has been the IRS’s number one enforcement priority.
It’s easy to be overwhelmed by the amount of tax relief options available without knowing which one is best. To find out what’s best for you or your business, receiving help from Certified Tax Relief Specialists is recommended. They will be able to identify options and eligibilities that are best suited, creating a clear plan to save huge amounts of dollars in the long run.
One well-established and trusted provider of these services is Ace Plus Tax Resolution, assisting taxpayers that want the best solution when dealing with IRS and state tax problems. Businesses and individuals no longer need to keep their heads in the sand when facing IRS tax problems, instead, the best and permanent solution can be found.
Within Ace Plus Tax Resolution, James Cha is a CPA and Certified Tax Resolution Specialist based in LA, representing clients across the U.S., and has been doing so for over 30 years. James offers free consultations and can be contacted at (213) 600-7388, ?(877) 792-0954, or James@AcePlusTaxResolution.com.
Educational tax information can also be found here that discusses ways tax issues can be resolved: https://www.youtube.com/channel/UCbL7h9yy9oOKyybrcPD_OXg/featured