If you owe the IRS, it will let you know. The agency sends regular notices to inform you.
The first few notifications act as warnings, and it can be easy to solve problems if you act quickly. However, if you ignore those warnings, you could end up with a legal claim on your property from the federal government.
5 IRS notices to watch out for
Here are five books that warn you that you owe taxes.
1. CP14: Balance is required
A CP14 is a notice you will receive from the IRS if you owe any money. There is no reason to panic; you can pay the money now and solve the problem.
First make sure the money you owe is correct. If you disagree with the amount, contact the IRS. If you do, pay. The IRS offers several ways to do this, including online, directly through your bank account. If you pay all you owe by the date specified in the notice, you will not be charged interest. But interest starts to accrue once that date has passed.
If you can’t pay, consider setting up a payment plan with the agency or an offer of compromise, which may allow you to settle your tax debt with the IRS for less than what you owe.
2. CP501: Reminder of your unpaid balance
This notice is a reminder from the IRS to pay the taxes you owe. Penalties and interest start piling up after the due date on your CP14, but you still have a chance to fix the problem before it adds up to a pile of debt.
Also, make sure the amount is correct and pay the IRS or set up a payment plan.
3. CP503: Second reminder
This notice serves as a second reminder that you still owe the federal government. You must pay the full amount by the date the notice shows to avoid additional interest and penalties.
4. CP504: Intent to charge
This notice represents a major change in tone, as the agency is now telling you about its intent to charge.
If you don’t pay what you owe right away, “the IRS can garnish your wages and bank accounts, and seize your property or real estate including your federal income tax return to pay the amount you owe,” according to its website.
5. LT11: Final notification regarding the intention to charge
The LT11 notice or 1058 letter is the last communication you will receive from the IRS regarding its intent to levy your estate. Now it can charge your wages or bank accounts for what you owe. It may also include a “Federal Tax Lien Notice,” which warns creditors that the IRS “has a lien on your current assets and any assets you acquire after filing a lien; it may affect your ability to get credit,” according to the agency’s website.
Additionally, the State Department may be prohibited from issuing or renewing your passport.
Take action early
If you do it early, you’ll save more money on interest and penalties. It’s best to pay off the debt or agree to a payment plan when you get the CP14, if not before. But if you haven’t responded to that notice, it’s not too late to act.
You can contact the IRS for free to ask questions and set up a payment plan, if needed. Depending on your situation, you may also want to contact a tax professional.
