Taxation & Estate Planning

What do all of these different IRS collection letters mean?

By howardlevy

IRS collection letters often look similar, and all seem intimidating. But they are not.

I get calls from my clients all the time who have received IRS collection letters and are in a state of anxiety. I ask them to read me what the heading of the letter says, and fax a copy over so I can advise them if the letter puts them in any jeopardy.

The IRS issues collection letters in this order:

CP 14                Balance Due

CP 501              Reminder, We Show You Still Owe

CP 503              Important - Immediate Action Required

CP 504              Urgent Notice - We Intend to Levy on Certain Assets, Please Respond Now

CP 90/CP 297   Final Notice of Intent to Levy and Notice of Your Right to a Hearing

CP 91/CP 298   Final Notice Before Levy on Social Security Benefits

This cycle can take several months to complete.  Each notice is usually issued about five weeks apart.  In high dollar cases or for businesses, the IRS may sometimes skip the complete cycle and go to the final notices.

Of the notices, only two are a true source of anxiety.  Those are (1) the Final Notice of Intent to Levy and Notice of Your Rights to a Hearing (CP 90/297) and (2) the Final Notice Before Levy on Social Security Benefits (CP 91/298). These notices are the only ones that permit the IRS to start proceedings to take wages, bank accounts, automobiles, real estate and business assets.  

The Final Notice of Intent to Levy contains important legal rights, including being able to file an appeal to have a hearing to settle the case, and take the results to U.S. Tax Court if they are not acceptable. No collection action occurs while the appeal is pending provided it is filed within 30 days from the issuance of the notice. 

Do not be confused by the other notices, they may be important and urgent, but they are not threatening. Only the “final notices” gives the IRS legal rights.

Full post as published by IRS and the Law on June 28, 2008 (boomark / email).