Understanding the CP90 Notice: Your Last Chance to Act
If you’ve received a CP90 Notice from the IRS, it’s natural to feel a bit panicked. It’s a serious document, and it means the IRS is ready to take action to recover your unpaid taxes. But, don’t worry, you’re not alone and there are steps you can take. This article will explain what the CP90 Notice means, why you received it, and what your options are.
What Does the CP90 Notice Mean?
A CP90 Notice is officially titled “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” Let’s break down what each part means. First, “Final Notice of Intent to Levy” indicates this is the last warning from the IRS. A “levy” is where the IRS legally seizes your property such as money in bank accounts, wages, or other assets. They do this to satisfy the taxes you owe. Second, “Notice of Your Right to a Hearing” means you have a legal right to discuss the issue with the IRS before they take further collection actions. Essentially, the CP90 means the IRS is not going to wait around anymore; they are going to start taking action to collect the tax you owe. It signals that you have reached the end of a long line of letters and they now intend to take action.
The Sequence of Events Leading to a CP90 Notice
It’s essential to know that the IRS doesn’t jump straight to a CP90 Notice. Typically, they send several notices before this one, giving you opportunities to address the tax issue. These often include:
- Initial Notice: You first get a notice when you have an outstanding tax liability.
- Reminder Notices: If you don’t respond, the IRS sends reminder notices.
- Intent to Levy Notice: This letter comes before a CP90, indicating the IRS’s intention to levy.
If these prior notices don’t result in payment, the IRS sends a CP90 Notice. Think of the CP90 as the last stop before they really start taking action to recover your debt. If you’ve reached this stage, it’s essential to understand how you got here and how to move forward. It is a sign of the seriousness of your situation.
Why Did You Receive a CP90 Notice?
You likely received a CP90 Notice because you have not responded to the previous letters or haven’t made arrangements to pay your tax debt. This could be due to:
- Unpaid Taxes: You owe income taxes, payroll taxes, or other taxes, and they’ve gone unpaid.
- Failure to Respond to Previous Notices: The IRS sent previous notices that were either ignored or not resolved.
- Lack of Payment Arrangements: The IRS was not able to work out an acceptable payment plan or installment agreement with you.
The IRS will use the CP90 to let you know that they are not going to wait around any longer. If you still fail to act, they will start going after your property to pay off your debts.
What Types of Property Can the IRS Levy?
The IRS can levy various types of property to satisfy your debt, and it is important to be aware of them to take action. These include:
- Wages: The IRS can garnish your wages, taking a portion of your paycheck directly.
- Bank Accounts: They can seize funds in your checking, savings, and other accounts.
- Retirement Accounts: In some cases, they may levy funds in your IRA or 401(k).
- Real Estate: The IRS can place a lien on your property and eventually sell it to pay off your taxes.
- Personal Property: They can seize your car, jewelry, and other assets of value.
Understanding the breadth of what could be subject to levy underscores the importance of responding to a CP90 Notice promptly.
Understanding Your Rights in the CP90 Notice: The Right to a Hearing
The good news is that receiving a CP90 notice does not mean that the IRS will just go straight to levying all your property. That is why the second part of the title is so important. “Notice of Your Right to a Hearing” indicates you can request a conference with the IRS before levy action occurs. In the CP90 notice, the IRS will provide you with specific directions on how to request a hearing. This is an important right that you have! It is critical to understand your rights and use them.
How to Request a Hearing:
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Follow the Instructions: The CP90 Notice will specify how to request a hearing. Typically, it involves responding in writing and providing your name, contact information, and reasons for requesting the hearing.
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Meet the Deadline: You’ll have a limited time to make this request, usually 30 days from the date of the notice. Make sure to respond before this deadline or you will lose the right to the hearing.
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Be Prepared: Once you request a hearing, be prepared to present your case. This could involve offering to set up a payment plan, showing errors in the IRS’s assessment, or explaining why the levy would cause significant financial hardship.
The hearing gives you an opportunity to argue your case and discuss the following:
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Offer-in-Compromise (OIC): An OIC could allow you to resolve your tax debt for less than you owe. You will have to prove you cannot pay the full amount.
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Installment Agreement: You can set up a monthly payment plan with the IRS to handle your tax debt. This is the most common option for taxpayers who cannot pay their tax in full.
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Hardship: If the levy would cause severe financial hardship, you could show this and the IRS may consider an alternative.
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Errors: If the IRS made a mistake in assessing your tax liability, you can provide documentation to prove that.
What Happens if You Don’t Respond?
If you ignore a CP90 Notice, the IRS will proceed with levy actions. Once the levy is implemented, it can be difficult and costly to reverse. The IRS could begin seizing your property, garnishing your wages, or otherwise taking steps to collect your debt. They may also begin filing liens on your property making it difficult to obtain credit or sell the asset. To avoid all these consequences, it is crucial to be proactive and respond timely to a CP90 notice.
Common Mistakes and Misconceptions
- Thinking It’s a Threat, Not a Reality: The CP90 Notice is not an idle threat; the IRS is serious about taking action.
- Ignoring the Notice: This is the worst thing you can do. By not responding, you allow the IRS to move forward and impose levies.
- Assuming You Can’t Do Anything: You have rights and options, but you must act quickly.
- Not Seeking Help: If you feel overwhelmed, professional tax help can help to navigate through the process and obtain the best resolution for you.
Tips for Handling a CP90 Notice:
- Act Immediately: Don’t procrastinate. Respond to the notice quickly. Time is of the essence when you are dealing with the IRS.
- Review Your Records: Make sure you understand what the IRS is claiming you owe. Review your tax returns and records to make sure the IRS has the correct amount.
- Contact the IRS: Once you have reviewed your records, contact the IRS to discuss options to pay your tax debt.
- Keep Detailed Records: Maintain copies of all notices, correspondence, and payments you make to the IRS.
- Seek Professional Tax Advice: If you are not able to understand the information in the CP90 notice, or do not know the best path forward, you can consider seeking professional assistance from a tax professional.
Related Concepts and Terms:
- Tax Levy: The legal seizure of your property to satisfy a tax debt.
- Tax Lien: A claim against your property for the amount of taxes you owe.
- Offer in Compromise (OIC): An agreement with the IRS to settle your debt for a lower amount.
- Installment Agreement: A payment plan set up with the IRS to pay your debt over time.
In Conclusion
A CP90 Notice is undoubtedly a serious matter, but it doesn’t mean it’s the end of the road. By understanding what it means, responding promptly, and being proactive, you can navigate this situation. Remember, the IRS is required to give you the opportunity to resolve your tax problem before they take levy action, and it is important to utilize this right. If you are ever unsure about the best path forward, it is always best to seek guidance from a qualified tax professional.