5 IRS Letters That Mean You're Running Out of Time (and What to Do About Each One)

If you owe money to the IRS, it will let you know. The agency sends out regular notices to alert you.

The first few notices serve as warnings, and it can be easy to resolve the issues if you act quickly. However, if you ignore those warnings, you may end up with a legal claim on your property from the federal government.

5 IRS notices to watch out for

Here are five letters warning you that you owe taxes.

1. CP14: Balance due

A CP14 is a notice you will receive from the IRS if you owe any money. There’s no reason to panic; you can pay the money now and resolve the issue.

First confirm that the amount you owe is correct. If you don’t agree with the amount, contact the IRS. If you do, pay it off. The IRS offers several ways to do this, including online, directly via your bank account. If you pay what you owe in full by the date that the notice specifies, you won’t be charged interest. But interest starts accumulating once that date has passed.

If you can’t pay, consider setting up a payment plan with the agency or an offer in compromise, which may allow you to settle the tax debt with the IRS for less than you owe.

2. CP501: Reminder of your unpaid balance

This notice is a reminder from the IRS to pay the taxes you owe. Penalties and interest start accumulating after the date listed on your CP14, but you still have the opportunity to resolve the issue before it compounds into a large pile of debt.

Again, make sure the amount is correct and pay the IRS or set up a payment plan.

3. CP503: Second reminder

This notice acts as a second reminder that you still owe money to the federal government. You have to pay the full amount by the date the notice indicates to avoid even more interest and penalties.

4. CP504: Intent to levy

This notice represents a significant change in tone, as the agency is now telling you of its intent to levy.

If you don’t pay what you owe immediately, “the IRS can levy your income and bank accounts, as well as seize your property or your right to property including your state income tax refund to pay the amount you owe,” according to its website.

5. LT11: Final notice on the intent to levy

The LT11 notice or 1058 letter is the last communication you will receive from the IRS of its intent to levy your property. It can now levy your wages or bank accounts for what you owe. It may also file a “Notice of Federal Tax Lien,” which alerts your creditors that the IRS “has a right to your interests in your current assets and any assets you acquire after we file the lien; it can affect your ability to get credit,” per the agency’s website.

Additionally, the State Department may be prohibited from issuing or renewing your passport.

Act early

The earlier you act, the more money you will save in interest and penalties. It’s ideal to pay off debt or agree to a payment plan upon receiving a CP14, if not before. But if you didn’t respond to that notice, it’s still not too late to take action.

You can consult with the IRS for free to ask questions and establish a payment plan, if needed. Depending on your situation, you may also want to contact a tax professional.