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.