Nobody enjoys receiving an unexpected letter from the IRS. But if you’ve received a CP14 Notice, there’s no need to panic. You haven’t fallen afoul of the IRS just yet.
The CP14 Notice is your very first warning of back taxes owed for a given tax year. Provided that you act quickly to resolve the issue, you may escape penalties, interest, and further IRS collection actions.
If you’re based in Seattle, WA or anywhere else in Washington State, our Seattle tax attorney can ensure you take the right steps when responding to the IRS. Your best course of action will depend on the accuracy of the CP14 Notice and your ability to pay any tax debt you might have.
Pay Your Taxes Owed Within 21 Days
If you agree with the IRS assessment of your unpaid taxes as outlined in the CP14 Notice, and you can afford the full amount owed, pay it immediately to avoid further IRS trouble. The IRS CP14 Notice will include details on how to do so, including options to pay online, via secure money order, or with a check sent by certified mail.
You’ll be given 21 days to pay the back taxes you owe. If you fail to pay the balance by this deadline, late payment penalties and interest will begin to accrue on your account, and you’ll start receiving more letters.
After 60 days, the IRS collections department may begin to pursue aggressive collection actions against you. This might include wage garnishment, a levy on your bank account, or even a federal tax lien on your property.
What To Do If You Can’t Afford To Pay Your Tax Debt
If you don’t have enough money to pay your tax debt in full, or you can only afford a partial payment of your balance, there are still several options open to you. The important thing is not to bury your head in the sand.
As long as you respond to the CP14 Notice before the due date, the IRS may provide some leeway in how you resolve your tax debt. Read the CP14 Notice carefully and pay particular attention to the alternative options for taxpayers who cannot pay the correct amount.
If you’re unsure of what to do, consult with a tax attorney in Seattle, WA. An experienced tax attorney can evaluate the CP14 Notice, your tax return, and your financial situation, and then guide you through your options. An attorney can also deal with the IRS on your behalf.
Set Up a Monthly Payment Plan
The IRS offers various installment agreements which allow you to pay off your IRS balance over a period of time with fixed monthly payments. An installment agreement is one of the best payment options for many taxpayers with too little income to pay the full amount at once.
Payment plans allow you to avoid the most stringent IRS penalties. They also prevent further IRS collection actions against you for the given tax year, as long as you don’t miss any of the agreed monthly payments.
Apply for a Payment Plan With Care
To set up an installment agreement, you can follow the instructions in your CP14 Notice to apply online or over the phone. It’s often wise to speak to a tax professional before you do so.
An attorney may increase your chances of a successful application. They can also negotiate an agreement that doesn’t place you under too much financial pressure each month, which would only lead to more IRS issues down the road.
When you receive a CP14 Notice, setting up an installment plan can be a relatively straightforward process, provided that the IRS believes you can’t afford to pay in full the unpaid amount you owe. It’s important to apply for a payment plan quickly, before the CP14 Notice due date, to minimize interest charges and penalties.
Reducing Penalties When You Owe Money to the IRS
Setting up a payment plan doesn’t free you from IRS penalties, although it will help you escape the worst of them. You may, however, be able to have one or more of your penalties dismissed.
The IRS sometimes provides a penalty abatement. First-time penalty abatement is often possible for IRS notice recipients who have avoided other IRS tax problems in recent years.
Reasonable cause penalty abatement is another possibility. This would apply if you owe back taxes because you were prevented from filing your tax return or paying your taxes by events outside of your control, such as a serious illness, natural disaster, or undue hardship.
Interest Continues To Accrue During a Payment Plan
Whenever you owe the IRS money, interest accrues on the outstanding balance, even if you have an installment plan. When determining the duration and payment schedule of your installment plan, you need to weigh how much you can afford to pay each month against how much your total tax debt will be increased by accruing interest rates.
In some situations, it’s possible to extend payment plans over several years. But if you arrange this, the steadily accruing interest might increase the total amount you owe by many thousands of dollars. Your attorney can help you calculate the optimal installment arrangement for your personal financial situation.
Apply for an Offer in Compromise
Another potential payment option for struggling taxpayers is an IRS offer in compromise. If granted, an offer in compromise would allow your IRS tax balance to be fully paid for a lesser amount than the total tax liability you currently owe.
Offers in compromise are typically only granted to individuals who have no ability to pay the full taxes they owe and will not have the ability to do so in the near future. You might also be granted an offer in compromise if your ability to pay your taxes has been disrupted by extenuating circumstances such as a natural disaster.
With offers in compromise, the payment will typically need to be sent in a lump sum rather than with an installment agreement. And the IRS doesn’t grant offers in compromise lightly.
An attorney can help you understand whether or not you’re a suitable candidate. They can also analyze your IRS CP14 Notice and your tax returns, prepare your financials for IRS examination, and increase your chances of a successful application.
Seek Currently Not Collectible Status
When the IRS sends you a CP14 Notice, another option is to apply for Currently Not Collectible status. This is a temporary collection hold which might last anywhere from six months to two years, alleviating the pressure of your IRS tax issue.
During this period, penalties and interest will continue to accrue on your unpaid balance, but the IRS will force you to make a payment with a levy on your bank account, a property lien, or any other action. You’re given some breathing room to bolster your finances before you pay your unpaid taxes.
What To Do if You Disagree With the CP14 Notice
You may disagree with the billing summary in your IRS CP14 Notice. A calculation error may have been made while preparing or filing the original tax return or in the IRS assessment of your tax group, status, or total liability owed.
If you disagree with the notice, you can contact the IRS to dispute it. You may be able to submit an amended tax return to update the original tax return. Any unpaid taxes on your IRS balance would then be reduced or dismissed accordingly.
You may then be able to have related penalties waived. Once again, it’s important to respond quickly, within the IRS CP14 Notice due date, before your IRS problem worsens.
It’s usually best to speak to a tax professional before you respond to the IRS to dispute the balance of unpaid taxes as stated in your IRS notice. With detailed knowledge of IRS tax law, tax attorneys can handle correspondence with the IRS most effectively.
What if You Don’t Respond to a CP14 Notice?
If you ignore the notice, it is likely that your balance will be handed over to the Automated Collection System (ACS) or possibly assigned to a revenue officer. Most likely, it will be handed over to ACS. No person is assigned to your account when handed over to ACS, but they will send a series of computer-generated notices. Below are the common notices that will follow:
CP501 Notice: Notice of Balance Due
CP503 Notice: Sendond Reminder of Balance Due
CP504: Intent to Levy
After the CP504 notice, the IRS will likely begin collection actions, such as wage garnishment, bank levy, or other forced collection actions. When you receive a CP14 notice, it is important to act sooner rather than later to prevent collection actions and to decrease penalties and interest as much as possible.
What To Do If You’ve Already Paid Your Balance
You may have already paid your balance when the IRS sends you a CP14 Notice. This kind of error is sometimes due to a correspondence backlog.
If this happens, verify that your tax return and payment were in fact received. You can do this by calling the IRS or opening an online account to check your balance.
If you’ve already paid the taxes owed within the 21-day period prior to the delivery date of the IRS notice, you can usually disregard the notice. But if you receive any more notices after that, contact the IRS or speak to a tax attorney to figure it out.
How a Tax Professional Can Help Resolve Your Unpaid Taxes
When you owe money to the IRS, you needn’t handle the situation alone. An experienced tax attorney can help to respond appropriately to any IRS notice you receive, be it a warning of back taxes, penalties, bank levies, or worse.
Whatever your tax group, level of income, or IRS difficulty, there may be legal options open to you that you’re unaware of. With in-depth knowledge of federal, state, and local tax law, your attorney can defend your legal rights against the IRS and help you find a way to pay your back taxes with minimal stress and harm to your finances and property.
A tax professional can also help you prepare your tax returns properly. They can help you stay in the Internal Revenue Service’s good books, so you avoid receiving any such notice again in the future.
For professional assistance with your CP14 notice, unpaid taxes, unfiled tax returns, or any other tax-related problem, contact Seattle Legal Services, PLLC today at 206-895-7268. Whatever back taxes you owe or collection actions you’re facing, our experienced attorneys can work hard to attain a favorable outcome and help you put your IRS worries behind you.