One thing you don’t really want showing up in your FL Gulf Coast mailbox (besides all of those dental office and windows installation ads) is a collection notice from the IRS.
And, for two years, you had a reprieve thanks to the IRS halting many of their collection notices so they could focus on their million-deep backlog.
Well, now the hiatus is over (as of Jan 2024). And if you have outstanding balances with the IRS, it means you’ve likely gotten one of those letters requiring you to pay up “or else.”
Now you have to face that unpaid tax debt that’s been lurking on the back shelf of your brain.
First, know that a notice like this isn’t the end of the world. Yes, it’s a letter you want to take seriously, but it’s not one that should trigger total hopelessness. Believe it or not, the IRS is willing to work with you. They themselves recognize that a sudden “final notice” letter showing up after a long period of no notices will cause some panic and burden.
They understand this so much that they’re even excusing around 1 billion in late-payment penalties for American taxpayers with unpaid balances under 100K from returns filed in 2020 and 2021. The relief was automatic, but failure-to-pay fees for unpaid balances from 2020 and 2021 will resume April 1, 2024.
Now, note that the IRS doesn’t just jump straight to final notices. The pause on collection notices only affected follow-up reminder notices (these usually drip out every 5 weeks after the first letter). The first letter about unpaid taxes (known as a CP14), were still sent out.
If you had tax debt, it’s possible that you only received that first letter before the IRS paused the automated collection notices.
A few other collection notices you may receive now that the hiatus is over:
– Special Reminder Letter (LT38 Notice): This was sent out last month (February). The intent was to alert you to the IRS’s collections process starting up in a more focused way. It also discussed potential penalty relief options.
– Notice of Intent to Levy (CP504 Notice): This means the IRS could seize your assets (wages, bank accounts, your car) to settle the debt. It can even affect your ability to get or renew your passport.
– Final Notice of Tax Lien (CP503 Notice): This is one you absolutely don’t want to ignore. It officially places a lien on your property, making it harder to sell assets or get a loan.
So what do you do if you’ve received a final collection notice?
Make sure you read the letter carefully to understand what you’re liable for and your payment options.
Then… pay the balance.
Really, it’s that simple. You might say, “I can’t pay my whole balance right now!” That’s not an uncommon sentiment. The good news here is you do have a great option: Set up a payment plan through the IRS’s website.
There are short-term and long-term options available. If you owe 50K or less, including tax, penalties, and interest, you can set up a long-term payment plan online. You can also set up a short-term payment plan (paying the balance in 180 days or less) online if you have less than 100K in combined tax, penalties, and interest.
If you choose the monthly payment option, you can choose the payment amount… somewhat. The IRS will want to know how much you can pay, but will also encourage you to pay as much as you can (this helps with interest and penalties). If you choose an amount that’s too low or just leave it up to the IRS to decide, they’ll usually set your minimum payment at what you owe divided by 72.
Now, a final option on all of this, and one I’d be remiss not to mention: Turning to an experienced Sarasota tax resolution specialist to help you deal with that notice. It’s not that you can’t do things on your own, but even with all of the great tools the IRS has set up for taxpayers, it can still be such a complicated, nuanced process. Why not trust someone who has experience with tax law to help you face this situation?
We’re happy to be that advocate for you, help you explore all your options, and then negotiate the best possible outcome with the IRS.
You’re not alone.
We’re here for you,
Maurie West
