If you’ve received the IRS letter CP14, you probably have some questions. The good news is that there’s still a lot you can do before it becomes a problem that impacts your finances or credit. However, the reality is that you probably do owe the IRS unpaid taxes if an IRS notice CP14 has arrived in your mailbox. Let’s go over what this form means and what options you have, and you’ll see why acting quickly is in your best interest.

Why Did I Get a CP14 Form From the IRS?

The IRS CP14 Balance Due notice informs taxpayers that they have an unpaid tax balance. The most common reason why taxpayers receive this notice is because they filed a tax return without actually paying the full amount of taxes owed with the return. If this is the case, you may have incorrectly interpreted what you owed. You may have also knowingly failed to pay your balance because you’re unable to cover what you owe in taxes right now. Here are some other common causes for CP14 letters:

• You owe a balance because the IRS is charging you a penalty for not filing your taxes by the filing deadline.
• You didn’t withhold enough taxes based on your income during the year.
• You failed to make your estimated quarterly tax payments in April, June, September, and January.

The good news is that your failure-to-pay penalty may be forgiven if this is your first time receiving it. Generally, the IRS is pretty generous if you request a first-time penalty abatement. However, the IRS is pretty strict when it comes to penalties for not covering your quarterly taxes on time. Some taxpayers are able to work something out to get that penalty dropped when creating a larger plan for debt relief with a tax lawyer.

What about interest on unpaid taxes? While you won’t be charged interest on the money you owe in late taxes as long as you pay your debt in full by the deadline on the notice, interest begins accruing on any unpaid amount left by that date. If you apply for a relief option, action on penalties and interest is typically suspended as long as you’re complying with the terms of your relief plan.

Could an IRS Notice CP14 Be a Mistake?

In most cases, you will at least understand why the IRS has applied a balance to your account. It’s very common to miss tax payments due to human error or lack of funds. If you only owe a penalty, the total may be low. 

Do you feel that the IRS has made a mistake, and that you paid all of your owed taxes in full by the deadline? Make sure you look over your tax return and payment records before sending the IRS any payments. While rare, it’s possible that the IRS has made an error. Don’t forget to give the deductions and credits on your return a second glance, too. In some cases, you may be able to reduce your tax liability by filing an amended return. This can potentially wipe out the owed balance by reducing what you actually owe in taxes.

What to Do After Receiving a CP14 Letter

Do not ignore your IRS CP14 letter just because you feel the IRS has made an error. The IRS will treat your debt as active even if it’s an error until you correct the situation! Once you’ve confirmed that the IRS’s assessment of your debt is correct, you have a few options. Here’s a look at how taxpayers should handle C14 letters:

• Pay Your Balance in Full: If you’re able, paying your debt in full by the deadline on your letter is the most direct way to remove yourself from the IRS’s radar.
• Request an Extension: The IRS is sometimes willing to give taxpayers who owe balances more time to pay. In some cases, you will be given up to 120 days to come up with the funds needed to get your balance to $0. This is what’s known as a Temporary Delay of Collection Process.
• Ask for Tax Relief: If you can’t cover your balance, the IRS may allow you to utilize a tax relief option.

The most common form of IRS debt relief is something called an Installment Agreement (IA). Using an installment agreement, you can pay off your balance over a span of time lasting up to 72 months (six years). If you can prove financial hardship, the IRS may allow you to enter into an Offer in Compromise (OIC) or Currently Non Collectible (CNC) status to reduce or freeze your debt. Keep in mind that both relief options require an extensive application process that requires you to prove that you’re unable to pay your tax debt by providing financial information and records.

Why You Shouldn’t Ignore a CP14 Letter

If this is your first time dealing with the IRS, it’s understandable if you feel intimidated. We want you to understand that having an IRS tax balance doesn’t have to snowball into a big ordeal if you address the issue promptly. The IRS is often more than willing to work with taxpayers with balances. In fact, this is precisely why the IRS has such a robust collection of relief options under its Fresh Start initiative.

There’s no reason to try to evade the IRS if you can’t pay your balance. If you try that, the serious consequences begin piling up. The IRS will begin applying liens, levies, and other penalties to your account if you don’t respond by the deadline on your CP14 letter. Unfortunately, this means that the IRS will try to seize your wages, bank accounts, and assets in an attempt to recover what you owe on your tax balance. This issue can end up haunting you for years even if your tax balance wasn’t that high. If the IRS decides to levy your wages, your employer will have no choice other than to comply. What’s more, nonpayment penalties that are added to your balance can end up costing you much more than what you originally owed in taxes.

It’s Time to Ask a Tax Expert: Get Help With Understanding Your CP14 Notice

If you’ve received the CP14 letter, the team at Tax Group Center is here for you. We can confirm what you owe, and you may be able to use the IRS CP14 pay online option through the IRS’s Direct Pay portal to pay as quickly as possible. Depending on your IRS CP14 reason for payment, our team may be able to help you explore options for penalty abatement and debt relief after addressing any unfiled returns from the past. Contact Tax Group Center if you have questions about a CP14 notice you’ve received from the IRS. Our team has been helping clients work with the IRS for 30 years, and we’re ready to help you, too!