CP71D Notice: Annual Reminder of Federal Tax Lien

The CP71D Notice is an annual reminder issued by the IRS to taxpayers with an active federal tax lien on their property due to outstanding tax debt. A federal tax lien is a legal claim by the IRS against a taxpayer’s property, which remains in place until the debt is fully paid or the lien is otherwise resolved. The CP71D Notice provides taxpayers with a yearly update on the lien status, reminding them of the unresolved debt and outlining available options to address it.

Key components of the CP71D Notice include:

1. Explanation of the Tax Lien
   The CP71D Notice informs taxpayers of the existing lien, explaining that it serves as a public record of the taxpayer’s debt to the IRS. The lien impacts the taxpayer’s ability to sell, refinance, or leverage assets for credit until the lien is released.
2. Summary of Outstanding Debt
   The notice includes a breakdown of the total balance owed, including accrued interest and penalties. This amount reflects the debt the IRS is securing through the lien, which continues to accumulate interest until it is fully resolved.
3. Options for Lien Resolution
   The CP71D outlines various ways to address and potentially remove the lien, including:
   • Full payment of the debt: Paying off the balance in full results in an automatic lien release.
   • Lien withdrawal: In certain cases, taxpayers may request a withdrawal, which removes the lien from public records but does not eliminate the debt.
   • Subordination: Taxpayers can apply for subordination, which allows other creditors to take priority over the IRS lien, making it easier to refinance or obtain loans.
   • Installment agreement: Setting up a payment plan may allow the taxpayer to request the lien’s removal after a history of timely payments.
4. Impact of the Tax Lien
   A federal tax lien negatively affects the taxpayer’s credit score and restricts property transactions. The CP71D Notice serves as a reminder that the lien remains in place until the debt is fully paid or arrangements are made to settle the balance.
5. Importance to Tax Debt Resolution
   The CP71D Notice emphasizes the ongoing nature of the lien and its impact on the taxpayer’s finances. By addressing the notice and working to resolve the lien, taxpayers can prevent further financial complications and improve their financial standing. Proactively working with the IRS to pay off or negotiate the debt helps protect assets and enables taxpayers to restore control over their finances.

The CP71D Notice is essential for maintaining awareness of outstanding tax liens and offers taxpayers a pathway to resolve their tax debt efficiently.