The IRS uses a series of increasingly urgent notices to inform taxpayers about unpaid taxes and request payment. These notices are your opportunity to address tax issues before the IRS takes more serious collection actions. Some IRS notices include specific deadlines and requirements that must be followed to avoid additional enforcement measures.

Common IRS Collection Notices and Their Meanings

CP14: Notice of Unpaid Taxes

This is typically the first notice you’ll receive if you have an unpaid tax balance. The CP14 informs you of the exact amount due, including any penalties and interest, and requests payment within 21 days. Upon receiving this notice, you should either pay the full amount, hire a tax attorney to help you prepare a response, or contact the IRS to discuss your options if you can’t afford to hire an attorney.

CP501: Reminder of Unpaid Balance

If you haven’t responded to the CP14, you’ll receive the CP501. This notice indicates that the IRS is actively pursuing collection and requires your immediate attention. The CP501 provides updated balance information, including additional penalties and interest that have accrued.

CP503: Second Reminder of Unpaid Taxes

The CP503 serves as a more urgent reminder that your tax debt remains unpaid. This notice signals that the IRS is moving closer to taking enforcement action if you don’t address the balance. At this stage, it’s crucial to take immediate action to prevent more aggressive collection measures.

CP504: Final Notice Before Levy

The CP504 serves as your final warning before the IRS can levy your state tax refund. While this notice warns of potential levy action, it’s important to note that the IRS must still send you a Final Notice of Intent to Levy (Letter 1058) before seizing other assets or income.

Letter 1058: Final Notice of Intent to Levy and Your Right to a Hearing

Letter 1058 informs you of the IRS’s intent to levy your assets (wages, bank accounts, business assets, personal assets, etc.) and your right to request a Collection Due Process (CDP) hearing. You have 30 days from the date of this notice to request a hearing, which can help you explore collection alternatives and appeal the proposed levy action.

Letter 3172 Notice of Federal Tax lien Filing and Your Right to a Hearing

Letter 3172 notified you the IRS filed a Notice of Federal Tax Lien and notifies you of your right to request a hearing to appeal the filing of the lien and discuss your payment options. This is not a notice of a proposed lien, but that a Notice of Lien was already filed with your local county recorder, putting the world on notice of your unpaid tax balances.

Other Collection Notices

Did you receive an IRS Notice we didn’t cover here? Check out this free tool from the Taxpayer Advocate Service, where you can search any collection notice and receive a general overview of what the notice is about and what your options are. If you owe the IRS more than $20,000, contact our office for a free case review/ We will review your notices and help you determine the best path forward.

Understanding Your Collection Due Process Rights

When you receive a Final Notice of Intent to Levy (Letter 1058) or a Notice of Federal Tax Lien (Letter 3172) you have important rights under the Collection Due Process (CDP) procedures, a safeguard put in place by Congress that requires the IRS to follow a set of procedures to ensure taxpayers have protections when facing IRS levy and lien actions. These rights include:

• The right to request a CDP hearing within 30 days of the notice date
• The opportunity to propose an alternative payment arrangement such as an installment agreement or offer in compromise
• The ability to dispute the underlying tax liability in certain circumstances
• The right to judicial review in Tax Court if you disagree with the hearing determination

During a CDP hearing, the IRS Independent Office of Appeals will:

• Verify that all legal and procedural requirements have been met
• Consider any legitimate issues you raise about the collection action
• Evaluate whether the proposed collection action balances the government’s need to collect taxes with your legitimate concern that it be no more intrusive than necessary

While you are allowed to represent yourself at an appeal hearing, it is recommended that you hire a tax attorney.  An attorney will bring a better understanding and knowledge of how to present information and evidence.

What to Do When You Receive an IRS Notice

When you receive any IRS notice, take these essential steps:

• Carefully read the entire notice to understand the specific issue and required action
• Verify the tax years and amounts involved
• Check the response deadline; you don’t want to miss it
• Consider your payment options:
  • Full payment
  • Installment agreement
  • Offer in Compromise
  • Currently Not Collectible status (if you’re facing financial hardship)
• Seek the advice of a tax attorney

Taking Action Before Enforcement Begins

The best time to address tax problems is before the IRS initiates enforcement actions. Early intervention allows you to:

• Avoid levies of your assets and income
• Have more flexibility in negotiating payment terms
• Potentially reduce penalties through abatement requests
• Maintain control of your financial situation

Don’t let fear or uncertainty prevent you from addressing your tax issues. At Ayar Law, we are experts in helping taxpayers resolve complex collection matters with both the IRS and Michigan tax authorities. Located in Farmington Hills, Michigan, and serving clients throughout the United States, our firm specializes in resolving complex tax matters and negotiating with the IRS. Call (248) 262-3400 or toll-free at (800) 571-7175 for a free case review.