Tax Lawyer's Blog

The IRS sends out millions of notices to taxpayers and third parties every year.

The subjects of the notices range from the transmittal of refunds, inquiries about items included on a return, demands for payment of back taxes to notifications of IRS enforced collection actions.

This tutorial deals with the seven most serious IRS collection notices.

CP 90/297 – Final Notice of Intent to Levy and Right to Hearing

The Notice of Intent to Levy usually gets the taxpayer’s attention. 

It means that attempts have been made to resolve the matter amicably, and because the taxpayer has either ignored prior friendly notices or the agent believes the taxpayer has sufficient income and assets to pay the debt in full, the IRS determines that it must pursue more aggressive means of debt collection.

If you get this notice, you need to act quickly before the IRS proceeds with enforced collection actions such as wage garnishment, bank account seizure and asset confiscation.

You have a right to a hearing with an appeals officer to forestall the pending enforced collection actions and work out a collection alternative such as an installment payment agreement or an offer in compromise.

CP 91/298 – Final Notice Before Levy on Social Security Benefits

The IRS is required to give specific notice to social security recipients before it seizes payments. Again, this notice doesn’t go out unless and until the IRS believes that the taxpayer is not cooperating. Usually, several more cordial notices have been ignored by the time this notice is issued.

Taxpayers receiving this notice have a right to a hearing with an appeals officer to discuss the legality of the IRS proposed collection actions and/or the viability of a collection alternative.

CP 161 – Request for Payment or Notice of Unpaid Balance

This is one of the nicer notices.

But don’t be fooled. If you ignore this one the IRS computers get irritated and begin spitting out meaner, more dire notices. 

Taxpayers who act to resolve their tax problems immediately upon receipt of the CP 161 have a much better chance of getting a favorable result.

We urge you to contact us as early in the collection process as possible. That gives you and us more time to analyze your case and develop a strategy for resolution.

CP 501 – Reminder Notice

This notice doesn’t seem too bad.

The IRS computers assume that you inadvertently ignored the CP 161 and send you this relatively friendly “reminder.”

But if you read between the lines you can see that the IRS wants its money and it wants it now.

Now is the time to solicit the assistance of an experienced tax attorney while a favorable resolution is still possible.

CP 503 – Second Reminder Notice

Grumpier than the CP-501, this is the last reminder the taxpayer gets before the IRS makes a final demand for payment.

After the final demand is made and the taxpayer still does not pay the debt in full, the IRS can open up “Pandora’s box” and let fly all kinds of nefarious collection actions.

Respond to this notice or suffer the consequences.

CP 504- Final Notice – Balance Due

The IRS doesn’t really expect a response to this one.

It is issued as a condition precedent to enforced collection action such as wage garnishments, bank account levies and asset seizures.

If you haven’t hired an attorney by now, you simply must do so immediately.

Even at this late date enforced collection action can be prevented.

CP 2000 – Notice of Proposed Adjustment

This notice is generated by the IRS correspondence audit division.

Usually, it is triggered by a discrepancy between the amounts of income reported to the IRS in your name and the amounts shown on your tax return.

Payors (employers, contractors, title agencies and banks) are required to report amounts they paid to you in the form of wages, commissions, independent contractor payments, interest, real estate sales proceeds etc.

The IRS uses this income information in its Matching Program to ensure that taxpayers are reporting all of their taxable income.The IRS will issue a CP2000 if it believes that some of the amounts reported to it in your name were not included on your return.

You can agree with the CP2000, disagree with it partially or dispute it in its entirety.

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