The IRS - CP14 Letter, Don’t Ignore It

Image courtesy of IRS.gov

Author’s Note

This article is comprised of information gleaned from interviews with IRS employees, Jackson Hewitt Tax Service, as well as press releases from CBS News, and the website of the Internal Revenue Service at IRS.gov.

This month, the IRS will be reinstating the practice of sending millions of form letters to taxpayers whom it believes underpaid their taxes in years past. If you, or anyone you know, are among those who receive one f these letters — called a CP14 — it’s crucial that you don’t ignore it. If you do, your scoff of the CP14 could lead to penalties, fines, or worse. That’s information from Jackson Hewitt's chief tax information officer, Mark Steber.

According to the IRS website, the agency historically issues about 9 million of these letters each year. In recent years, due to COVID restrictions, remote working practices, and an overall lack of available manpower, the IRS has suspended the practice of sending out this and many other of its standard snail mail fare. In February, the agency announced that it would cease sending various types of letters.

So, what causes you to get an IRS CP14?

When the IRS computers tell them that someone has a balance of more than $5 on their account, the balance threshold triggers the generation of a CP14 for that individual. Having a balance of over $5 can be related to a number of issues, such as failing to report some income or failure to pay a balance in full.

According to a post on the website of the Taxpayer Advocate Service regarding the CP14, the letter is one of the most common notices sent to taxpayers. The service also explains that the purpose of the letter is to inform taxpayers of the open balance so that additional fees and interest don’t begin to compound.

The IRS is required to send CP14 notices within 60 days after the tax agency assesses a tax liability, which means people who filed their taxes leading up to the mid-April tax deadline could get the letters in June.

If for any reason you receive one of these CP14 letters and can’t afford to pay the balance or at least the full balance indicated on the form, the IRS says it will work with taxpayers to set up a payment plan. The IRS can set that up through an online application.

The IRS says taxpayers dealing with financial hardship can also ask for a temporary delay of collection until they get back on their feet (See the IRS' website for more information on applying for a delay.)

On the other hand, if you have reason to believe the information on the CP14 is incorrect, and you wish to challenge the assertion that you owe, or just want to challenge the amount of the balance, you would be best served to use the number on the form to contact the IRS promptly after receiving the letter and certainly within the 21 days provided by the letter.

If you decide to make a challenge, however, be prepared to document your case, through receipts, invoices, records of electronic transfers, or bank records proving your payment if you have already paid the tax that the IRS claims you owe.

The CP14 letter will provide a number for you to contact the IRS, however, since the onset of the pandemic, the agency has been difficult to reach on the phone. You can also mail the IRS through the contact information that will be included in the letter. It would be beneficial to include copies of your proof along with your challenge.