Buzz
As tax season picks up, the IRS is intensifying its efforts to recover unpaid taxes from previous years. According to the Detroit Free Press, over 3.7 million taxpayers are expected to receive LT38 notices in the upcoming months. The LT38 is an automated reminder about outstanding tax balances, providing guidance on how to settle the debt. The IRS had paused these notifications in February 2022 due to the pandemic-related backlog.
Taxpayers with unpaid tax balances first get a CP14 notice, which alerts them to the owed amount, followed by subsequent reminders every five weeks. If you received the initial notice a few years ago before the IRS halted follow-ups, don't be surprised if an LT38 notice arrives now.
How to Handle an IRS Collection Notice
First, don't worry if you receive an LT38—it's not an audit notice. However, you should still pay attention to it. Review the letter carefully, and if you hire a qualified professional for your taxes, make sure to include the notice along with your other documents.
There are several important actions that might be required:
File any missing returns. If the notice points to unfiled tax returns from previous years, take care of them as soon as possible.
Pay any overdue balance. If you owe taxes, settle the amount to prevent interest and penalties from accumulating. The IRS provides various online payment options. If paying in full is not possible, you might qualify for a payment plan or a temporary hold on collections.
Challenge any inaccuracies. If you believe the notice was sent in error or contains incorrect information, get in touch with an IRS representative. Be prepared to provide supporting documents, such as a copy of filed returns and proof of payment.
The IRS is currently waiving certain failure-to-pay penalties for tax years 2020 and 2021, but these charges will begin on April 1.
Remember, the IRS will never contact you by email or text about your refund or outstanding balance. Avoid opening such messages or clicking on any links—these are scams. If you get a letter in the mail, you can search the code on the IRS website for more information on the next steps.
