How the IRS communicates collection intent — what to look for and how to respond
The IRS primarily communicates collection intent in writing. These letters and notices spell out the balance due (if any), explain why the IRS believes you owe tax, list deadlines, and often offer collection options. Knowing how to read and react to the letters you receive is the fastest way to stop escalation and protect assets.
Note: This article is educational and not legal or tax advice. For guidance tailored to your situation, consult a qualified tax professional or attorney.
Typical notice sequence and what the codes mean
The IRS generally follows a pattern as collection moves from reminder to enforcement. Common notice codes you may see include:
- CP14 — Balance Due Notice: an initial notice that explains the assessed amount and requests payment, typically giving about 30 days to respond. (IRS: Understanding Your Bill or Notice)
- CP501/CP503/CP504 — Series of reminder and more urgent collection letters: these escalate in tone and frequency if a CP14 goes unanswered and interest or penalties accrue.
- CP90 / Final Notice of Intent to Levy — A final notice that warns of imminent levy action and explains your right to request a Collection Due Process (CDP) hearing; this is a pivotal point for protecting assets.
Exact codes and letter names can change; always read the code and the date on the notice and verify on the IRS site. (IRS: Collection Process)
Why you should not ignore these letters
In my practice helping clients with tax collection issues, I’ve seen how early attention creates options and how delay removes them. Ignoring a CP14 may simply lead to more notices; ignoring a CP90 can lead to a bank levy, wage garnishment, or lien on property. The IRS also has a 10-year collection statute of limitations (the Collection Statute Expiration Date or CSED) that applies after assessment, but you should not rely on timing alone to avoid enforcement. (IRS: Collection Statute Expiration Date)
Immediate steps to take when you receive an IRS collection letter
- Read the notice carefully and note all dates, the notice code, and the amount claimed.
- Verify legitimacy:
- IRS letters are mailed through the U.S. Postal Service. The IRS usually initiates contact by mail, not by phone, for collection. If in doubt, call the IRS phone number printed on the notice or check the IRS website before responding to unexpected calls or emails. (IRS: Understanding Your Bill or Notice)
- Watch for signs of scam attempts—fraudsters may claim to be the IRS but ask for payment by gift card or wire transfer. If you suspect a scam, report it to the IRS.
- Gather documentation: copies of the tax return for the year in question, bank statements, cancelled checks, proof of previously made payments, and the notice itself.
- Consider short-term actions to preserve options:
- Pay the amount in full if you can.
- Request an installment agreement if you cannot pay in full.
- File for an Offer in Compromise only if you qualify and have documentation that shows collection potential is limited. See our guide on Choosing Between an Installment Agreement and an Offer in Compromise and the checklist for Preparing an Offer in Compromise: Documentation Checklist.
- If the notice is a Final Notice of Intent to Levy (CP90 or similar), you generally have 30 days to request a Collection Due Process (CDP) hearing to appeal the proposed levy. Request it in writing or by following instructions on the notice; missing this window may forfeit CDP rights. (IRS: Collection Due Process)
Common remedies and when they are appropriate
- Pay in full: best when feasible to stop further interest and penalties.
- Installment agreement: appropriate for taxpayers with steady income who can pay over time. The IRS offers multiple installment plan options depending on the amount owed.
- Offer in Compromise (OIC): a negotiated settlement for less than the full amount owed. OICs require detailed financial disclosure and are accepted only when the IRS determines reasonable collection potential is less than the unsecured tax balance. See our related resources on preparing an OIC and how the IRS evaluates offers.
- Collection Due Process (CDP) hearing: available when you receive a levy notice; a CDP can stop a levy while you pursue appeals.
Each option has pros, cons, and eligibility rules; for example, OIC acceptance can affect future refunds and tax credits.
Documentation you should prepare
Whether you plan to pay, negotiate, or appeal, assemble a packet:
- The notice you received (copy front and back)
- Federal tax returns for the tax year involved
- Proof of current income (pay stubs, profit/loss statements)
- Monthly living expense records (rent/mortgage, utilities, child care)
- Bank and investment statements
- Records of previously made payments to the IRS
- Power of Attorney (Form 2848) if someone else will act for you
If applying for an Offer in Compromise, the IRS has specific financial forms and documentation requests; the process is document-heavy and benefits from professional preparation. (See: Preparing an Offer in Compromise: Documentation Checklist)
How to verify or dispute the IRS position
If you believe the notice is incorrect:
- Check the tax return and supporting documentation for the assessment year.
- If you find an error, respond to the notice explaining the discrepancy and include supporting documentation.
- If the IRS made a computational or identity error, provide proof promptly; for identity-theft situations the IRS has special procedures and a dedicated process to restore rightful taxpayers’ records.
If you disagree after the IRS responds, you may have appeal rights. The IRS Office of Appeals can mediate many disputes without litigation.
Recognizing and avoiding scams
Scammers often impersonate the IRS. Typical red flags include threats of arrest, demands for immediate payment by non-traditional methods (gift cards, wire transfers), and caller ID spoofing. Real IRS letters will offer instructions and legitimate payment methods; if ever unsure, verify using the phone numbers and pages on IRS.gov. (IRS: Tax Scams/Consumer Alerts)
When to get professional help
Engaging a tax attorney, enrolled agent, or CPA is wise when:
- The amount owed is large or there are multiple years involved
- A levy or lien action is imminent or already in place
- You may qualify for an Offer in Compromise but need help preparing financial documentation
- You prefer representation during a Collection Due Process hearing
In my work, a properly completed Form 2848 (Power of Attorney) and a clear financial package often change the conversation with the IRS from enforcement to resolution.
Real-world example
A client I worked with ignored a CP14 for several months, assuming it was a mistake. The account progressed to CP90, and a levy notice followed. By the time the client contacted me, the IRS had already scheduled a bank levy. We requested a CDP hearing and negotiated an installment agreement; the client avoided a prolonged bank levy, but the process cost time, stress, and additional penalties that could have been avoided with earlier response.
Practical checklist: responding within 10 days
- Stamp the notice date and scan a copy into your records.
- Verify the notice code and read the deadline language.
- Confirm the notice’s legitimacy on IRS.gov if unsure.
- Call the IRS or engage a tax pro if the amount is unclear or the notice threatens immediate action.
- If you cannot pay in full, submit an installment agreement request or other relief options before the deadline.
Useful IRS resources (authoritative)
- IRS — Understanding Your Bill or Notice: https://www.irs.gov/payments/understanding-your-bill-or-notice
- IRS — Collection Process: https://www.irs.gov/businesses/small-businesses-self-employed/irs-collection-process
- IRS — Collection Due Process (CDP) and Equivalent Procedures: https://www.irs.gov/businesses/small-businesses-self-employed/collection-due-process-cdp-and-equivalent-procedures
- IRS — Tax Scams/Consumer Alerts: https://www.irs.gov/newsroom/tax-scams-consumer-alerts
Final thoughts
IRS collection letters are not mere formalities — they create legal deadlines and options. Early, documented action preserves rights and widens the range of available remedies. If you receive a notice, act promptly: read it, verify it, gather documentation, and choose the right response — whether that’s payment, negotiation, or appeal.
Professional disclaimer: This material is for educational purposes only and does not substitute for individualized tax, legal, or financial advice. Consult a qualified professional about your specific circumstances.
