Tax Tips

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The CP14 IRS Notices Are Here… What If You Have A Balance Due?

June 22, 2017 : Jim Buttonow - The Tax Institute

If you filed a tax return and owed taxes, but didn’t pay them, you probably have received your first notice from the IRS requesting your payment: the CP14, Balance Due.

That’s not all, though. These notices also explain that you owe a penalty for not paying your taxes by the filing deadline. About half of these notices also include an estimated tax penalty if you didn’t withhold enough in taxes or make estimated tax payments throughout the year.

It sounds bad, but it doesn’t have to be. No one likes to pay IRS penalties, and no one likes IRS collection letters.

First, make sure the balance the IRS says you owe is correct. This is also a good time to take a fresh look at your return to see if any deductions or credits are missing. If so, file an amended return to lower your tax bill.

If the notice is correct, there are several options to pay and even an opportunity to save on penalties if you’re in this situation. Here’s what you need to know: 

  1. You may be able to just ask for more time. If you need a little more time (up to 120 days) to get all the money together to pay the IRS, you can call the IRS and simply request an extension. Make sure to ask the IRS for the full payoff amount at the end of 120 days so you’re not left with any balances.
  2. The IRS offers different options depending on your situation. What if you can’t pay at all, or can’t pay the full amount within 120 days? Don’t ignore the balance. Depending on your financial circumstances, there are different payment plans (called installment agreements), and other options like deferred payment (called currently not collectible status) or settlement (called offer in compromise) for people in hardship situations. Remember that getting into the right agreement is critical to avoid liens and levies. Liens go on your public records and credit report, and levies take money from your wages or bank account. Your tax professional can help determine the best option for your situation.
  3. You may be able to reduce or erase penalties.If you got a CP14 notice, you also got a failure-to-pay penalty. If this is the first time you’ve gotten the penalty in the past three years, you may be able to ask for first-time penalty abatement. Just call the IRS and request this penalty relief. On the other hand, the estimated tax penalty doesn’t qualify for first-time penalty abatement. You’ll have to find an exception. Your tax pro can help.

Bottom line: If you get a CP14 notice, you need to act. If you ignore the issue, penalties will build up, and the IRS will start sending more urgent notices requesting payment.

If you receive a CP14 notice this June and don’t do anything, the IRS will continue to contact you all summer and escalate enforcement in September. Do yourself a favor and look into your options for payment and penalty relief now so you can enjoy your summer.

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Jim Buttonow - The Tax Institute

Jim Buttonow - The Tax Institute

H&R Block

Jim, CPA, CITP, leads H&R Block efforts to help clients with tax problems. Jim serves as chairperson of the IRS Electronic Tax Administration Advisory Committee. He has more than 28 years of experience in IRS practice and procedure, including 19 years at the IRS.

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