Tag Archives: CP504

What does my IRS notice mean?

You go to the mailbox and one of the letters has a return address that sends chills down your spine: IRS. While most people don’t like being contacted by the IRS, many of their letters are no cause for panic because they are not audit related.  However, they should also not be ignored as some of them are time bound and require a response. This post will discuss some of the common notices the IRS sends and how to interpret what it means.

IRS notice types

The IRS sends notices for many reasons: bills for overdue taxes, requests for you to file a missing tax return, to request additional information about something, notify you of a pending deadline, etc. When the IRS sends a letter via certified mail, it’s giving you legal notice that they intend to levy you, file a lien against you, or that they will examine or audit you or your business.  The notice will ALWAYS thoroughly explain why you are receiving it. READ IT.

The very bottom of this post list some of the many notices that the IRS sends and provides you with a brief explanation. If you click on the green notice number, you will be taken to the IRS site where you can read some further details about that particular notice. If you want to see examples of the notices listed, then click this link and sort the notices by name to find the one your’re looking for.

What IRS notices are particularly important?

Any of the notices that deal with collections, should be “handled with care” so to speak. Why? Because if one doesn’t address them, they could find themselves on the wrong side of the IRS pretty quick. What are these notices?

CP503We have not heard from you and you still have an unpaid balance on one of your tax accounts.
CP504You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) your state income tax refund and apply it to pay the amount you owe.
CP504BYou have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) certain property or rights to property and apply it to pay the amount you owe.
Letter 1058
We haven’t received your payment for overdue taxes. We intend to seize your property or rights to property (levy). You must contact us immediately.

What if you still don’t understand the notice after reading it?

We can help via our notice evaluation service. For $75 we will analyze your notice and provide you with a detailed explanation (in plain english) of what it means. We’ll also review your IRS account (with your consent and the filing of some paperwork) if you have debt and even provide your IRS CSED (the date your IRS debt will expire).

Call us at (773) 239-8850 or click our email address at the bottom of this screen to get started.

Common IRS notices

Notice NumberDescription
CP01HYou received a CP 01H notice because we were unable to process your tax return. The IRS has locked your account because the Social Security Administration informed us that the Social Security number (SSN) of the primary or secondary taxpayer on the return belongs to someone who was deceased prior to the current tax year.
CP04Our records show that you or your spouse served in a combat zone, a qualified contingency operation, or a hazardous duty station during the tax year specified on your notice. As a result, you may be eligible for tax deferment.
CP08You may qualify for the Additional Child Tax Credit and be entitled to some additional money.
CP09We’ve sent you this notice because our records indicate you may be eligible for the Earned Income Credit (EIC), but didn’t claim it on your tax return.
CP10We made a change(s) to your return because we believe there’s a miscalculation. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year.
CP10AWe made a change(s) to your return because we believe there’s a miscalculation involving your Earned Income Credit. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year.
CP11We made changes to your return because we believe there’s a miscalculation. You owe money on your taxes as a result of these changes.
CP11AWe made changes to your return because we believe there’s a miscalculation involving your Earned Income Credit. You owe money on your taxes as a result of these changes.
CP12
We issue a CP12 Notice when we correct one or more mistakes on your tax return, and a payment becomes an overpayment, or an original overpayment amount has changed.
CP12AWe made changes to correct the Earned Income Credit (EIC) claimed on your tax return.
CP12EWe made changes to correct a miscalculation on your return.
CP13We made changes to your return because we believe there’s a miscalculation. You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.
CP13AWe made changes to your return because we found an error involving your Earned Income Credit. You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.
CP14We sent you this notice because you owe money on unpaid taxes.
CP14IYou owe taxes and penalties because you didn’t take out the minimum amount you had to from your traditional individual retirement arrangement (IRA). Or, you put into a tax-sheltered account more than you can legally.
CP16We sent you this notice to tell you about changes we made to your return that affect your refund. We made these changes because we believe there was a miscalculation. Our records show you owe other tax debts and we applied all or part of your refund to them.
CP19We have increased the amount of tax you owe because we believe you incorrectly claimed one or more deductions or credits.
CP20We believe you incorrectly claimed one or more deductions or credits. As a result, your refund is less than you expected.
CP21AWe made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s).
CP21BWe made the change(s) you requested to your tax return for the tax year specified on the notice. You should receive your refund within 2-3 weeks of your notice.
CP21CWe made the change(s) you requested to your tax return for the tax year specified on the notice. You’re not due a refund nor do you owe any additional amount. Your account balance for this tax form and tax year is zero.
CP21EAs a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes.
CP21IWe made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes.
CP22AWe made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s).
CP22EAs a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes.
CP22IWe made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes.
CP23We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a balance due because of these changes.
CP24We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes.
CP24EWe made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes.
CP25We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.
CP27We’ve sent you this notice because our records indicate you may be eligible for the Earned Income Credit (EIC), but didn’t claim it on your tax return.
CP30We charged you a penalty for not pre-paying enough of your tax either by having taxes withheld from your income, or by making timely estimated tax payments.
CP30AWe reduced or removed the penalty for underpayment of estimated tax reported on your tax return.
CP32We sent you a replacement refund check.
CP32ACall us to request your refund check.
CP39We used a refund from your spouse or former spouse to pay your past due tax debt. You may still owe money.
CP42The amount of your refund has changed because we used it to pay your spouse’s past due tax debt.
CP45We were unable to apply your overpayment to your estimated tax as you requested.
CP49We sent you this notice to tell you we used all or part of your refund to pay a tax debt.
CP51AWe computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.
CP51BWe computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.
CP51CWe computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.
CP53We can’t provide your refund through direct deposit, so we’re sending you a refund check by mail.
CP59We sent you this notice because we have no record that you filed your prior personal tax return or returns.
CP60We removed a payment erroneously applied to your account.
CP62We applied a payment to your account.
CP63We are holding your refund because you have not filed one or more tax returns and we believe you will owe tax.
CP71You received this notice to remind you of the amount you owe in tax, penalty and interest.
CP71AYou received this notice to remind you of the amount you owe in tax, penalty and interest.
CP71CYou received this notice to remind you of the amount you owe in tax, penalty and interest.
CP71DYou received this notice to remind you of the amount you owe in tax, penalty and interest.
CP88We are holding your refund because you have not filed one or more tax returns and we believe you will owe tax.
CP90CWe levied you for unpaid taxes. You have the right to a Collection Due Process hearing.
CP120You need to send us documentation of your tax-exempt status.
CP130Your tax return filing requirements may have changed: You may no longer need to pay the Alternative Minimum Tax.
CP152We have received your return.
CP153We can’t provide you with your refund through a direct deposit, so we’re sending you a refund check/credit payment by mail.
CP166We were unable to process your monthly payment because there were insufficient funds in your bank account.
CP178Your tax return filing requirements may have changed: You may no longer owe excise tax.
CP180/CP181We sent you this notice because your tax return is missing a schedule or form.
CP231Your refund or credit payment was returned to us and we need you to update your current address.
CP259We’ve sent you this notice because our records indicate you didn’t file the required business tax return identified in the notice.
CP297CWe levied you for unpaid taxes. You have the right to a Collection Due Process hearing.
CP501You have a balance due (money you owe the IRS) on one of your tax accounts.
CP521This notice is to remind you that you have an installment agreement payment due. Please send your payment immediately.
CP523This notice informs you of our intent to terminate your installment agreement and seize (levy) your assets. You have defaulted on your agreement.
CP565We gave you an Individual Taxpayer Identification Number (ITIN).
CP566We need more information to process your application for an Individual Taxpayer Identification Number (ITIN). You may have sent us an incomplete form. You may have sent us the wrong documents.
CP2005We accepted the information you sent us. We’re not going to change your tax return. We’ve closed our review of it.
CP2006We received your information. We’ll look at it and let you know what we’re going to do.
CP2057You need to file an amended return. We’ve received information not reported on your tax return.
CP2501You need to contact us. We’ve received information not reported on your tax return.

Understanding IRS Collection Procedures

The U.S. Internal Revenue Service is the single largest collections agency in the world.  According to the most recent statistics available, in 2013 the IRS spent $11.6 billion and employed just under 87,000 to collect more than $2.8 trillion in tax revenue.  Of those 87,000 personnel, over 19,000 are directly involved in enforced collections against taxpayers that owe back taxes.

While the IRS is one bill collector that can have a serious impact on your life, it’s important to understand just how they work.  So the first thing to realize is that the IRS is a slow moving bureaucracy.  It is highly driven by forms, written procedures and is resistant to change.  Their playbook is public record and they are required to follow it.  While this may not bode well for you resolving your tax matters expeditiously, it does give you some comfort in that you can figure out what is coming next.  Below we break the IRS collections process down into the 1040 notice sequence and the collections system.

1040 Notice Sequence
The IRS doesn’t start collections against you simply because you file a return with a balance due.  The process actually begins when they issue a letter called a Statutory Notice of Deficiency or SNOD.  This letter informs you of the IRS’ intent to assess a tax deficiency and informs you of your rights to dispute the proposed adjustment.  From here, the notice sequence progresses like this if you fail to respond at each stage:

  • Request For Payment
  • Form 668 – Notice of Federal Tax Lien Filing (for balances over $10,000)
  • CP501 – Reminder Notice
  • CP503 – Immediate Action Required
  • CP504 – Notice of Intent to Levy
  • Letter 1058 – Finial Notice of Intent to Levy

The CP503 typically comes about 4-5 weeks after the first notice.  The remaining notices will each come around 30 days after one another so it can take about 4 months from the initial letter until it culminates with a Letter 1058.  While the CP504 language sounds nasty, one may choose to ignore it.  However, there are two things to note about the Letter 1058:

  1. It is the first opportunity you have to file an appeal
  2. Thirty days after the letter, the IRS can levy you.

Does this mean that the IRS will levy you?  Not necessarily; especially if they don’t know where your assets are.  However, it would be wise to pick up the phone at this point and call the IRS as well as file Form 12153, Request for Collection Due Process Hearing (i.e. appeal).

Collections System
Now you may ask why understanding the “system” is even important to this discussion.  Well, it’s because some of the notices you get aren’t being generated by humans.  They are done on an automated schedule.  Thus, until your case winds up with a dedicated “human” at some point (i.e. a Revenue Officer) it can be hard/frustrating trying to get the notices to stop.  Thus, collections enter into the following levels of the system at varying stages:

  1. Collection efforts on each account begin with computer notices from a Regional Compliance Center.
  2.  If the efforts of the Compliance Center  don’t yield payment, the account is then assigned to the Automated Collection System (ACS). ACS attempts to collect the tax liability by initiating telephone calls to the taxpayer and others. Unless your case has special circumstances, you will usually stay assigned to ACS even if you accumulate 2-3 years worth of tax debt as an individual or 3-4 quarters of payroll liability as a business.  But once you reach these levels or you simply fail to respond…
  3.  The account is eventually assigned to a Revenue Officer for a field investigation.

When you are assigned to a Revenue Officer, the course of your tax case can take a sudden shift. Having an experienced, trained human being looking at your tax case, and passing judgment on you based on what’s in a file and thereby determining how they are going to handle your tax case, means a lot.  Unfortunately, due to current economic times, the waiting line for assignment to an RO is many areas of the country is growing longer and longer.

Similar to above, having a trained representative on your side working the case with the IRS can mean a world of difference.  If you are interested in assistance or just want to discuss your situation, we’d be happy to speak with you.  Simply shoot us an email or give us a call.

Until next time…