Have you received a CP14 IRS Notice letter that’s left you baffled? The simple explanation is that you owe the IRS money. However, a CP14 Notice doesn’t necessarily mean a heavy tax debt. Here’s a quick guide to what to do if you get an IRS CP14 letter.
What Is CP14?
The formal IRS term for the CP14 Notice letter is the Notice of Tax Due and Demand for Payment letter. It is sent for balances of $5 or more. If you’ve received this letter, it means that the tax return you filed carries a balance due for taxes owed. Your letter should contain your name, the amount you owe, the tax year you owe for, applicable interest and penalties, and the date the letter was issued by the IRS.
What Should I Do If I Get a CP14 Letter From the IRS?
A CP14 IRS notice doesn’t need to be a cause for panic. This is actually the most common letter sent to taxpayers. In fact, it’s something that many tax attorneys resolve with a single phone call on a daily basis. However, that doesn’t mean you should sit on this letter.
The CP14 timeframe is strict. When looking at your letter, you will notice that the IRS requests payment within 21 days. Failure to pay the amount owed can result in penalties and fees. If you go 60 days without paying, the IRS is permitted to move forward with collection activity. This puts you in jeopardy of having a Notice of Federal Tax Lien filed against you. A lien secures the government interest in your property when you fail to pay your tax debt. A lien is the final step before a levy that empowers the IRS to seize property and assets.
Hopefully, you’ll take care of an IRS CP14 letter long before it gets to that point. We’ve already established that the first step to successfully handling a CP14 letter is to not ignore it. The next step is deciding the proper way to respond.
How to Respond to a CP14 IRS Letter
Refer to your personal tax records to see what they say about the balance due in question. If you can verify that you’ve paid the correct amount in taxes, you can hold off on paying the balance immediately. The caveat is that you must respond to the IRS to inform them about the error instead of just pushing the letter aside.
You have 60 days from the date of the IRS CP14 letter to respond. Taking care of your response earlier is always advised. Even someone who is fully confident that they’ve paid the correct balance on their taxes should consider consulting a tax professional at this point. A careful review of your income and deductions in comparison to the return that was filed can help you to have confidence that contesting the IRS bill is the correct decision.
If you’ve had your taxes prepared by a “mega” tax company, there’s a good chance that a seasonal tax preparer without advanced skills and expertise prepared your taxes. This may have left you vulnerable to an error on your return.
What if you determine that you do actually owe the IRS money after receiving a CP14 letter? Taxpayers are essentially left with four options. These options are: paying the balance in full, asking for “temporary time to pay” without penalty, seeking a payment plan, or seeking forgiveness of your balance. Here’s how each option could play out:
- Paying Your Balance: If a review of your tax records shows that the CP14 letter is correct, you can simply pay the taxes that you owe in full. The IRS accepts both online and mailed payments.
- Requesting Temporary Time to Pay: There’s a second option to consider if the CP14 letter is accurate. If requested, the IRS may grant you up to 120 days to pay your balance in full. This option should only be pursued if you have complete certainty that you can pay the IRS in full by the extended deadline. Penalty forgiveness is forfeited once you make a payment.
- Payment Plan: The IRS offers installment plans for most debts. If the balance on your CP14 is under $50,000, the IRS can offer you a 72-month payment plan. Debts that fall between $50,000 and $100,000 can qualify for an 84-month payment plan. Requesting a hardship payment plan is another option. When a hardship plan is approved, the taxpayer makes payments based on their financial capabilities instead of regular IRS rules. Getting approved for a hardship payment plan is much harder than getting approved for a traditional installment plan because the taxpayer must supply income, asset, expense, and liability disclosures.
- Forgiveness: It’s possible to have the balance on a CP14 forgiven using either offer in compromise (OIC) or currently not collectible (CNC) status if you’re having tax problems due to financial hardship.
While installment plans are fairly easy to get, access should not be assumed. It’s important to follow all IRS guidelines for being approved for an installment plan to avoid being disqualified due to nonpayment. You can read up on tax FAQs to get an idea of how installment and forgiveness plans work.
What If the IRS Sends a CP14 Notice Letter by Mistake?
If the IRS sends you a CP14 Notice letter, the agency is confident that you owe tax money based on a discrepancy that they have confirmed is not a math issue. You may have tax and financial documents that you feel prove otherwise. If you think there’s been an IRS CP14 mistake, you should call the phone number located in the IRS Help section of your CP14 Notice letter. It’s advised that you have returns, amended returns, canceled checks, and other relevant documents ready when placing the call. More importantly, a taxpayer can protect their interests by having a tax professional guide the call on their behalf.
Don’t let a CP14 Notice from the IRS stop you in your tracks! The tax professionals at Tax Group Center can help you navigate this situation. Contact us today!