IRS Official Warns Americans of Coming Notices

In a file photo, a postal worker is seen putting stamps on envelopes heading to the IRS Monika Graff/Getty Images

The Internal Revenue Service (IRS) confirmed that it is currently sending collection notices to Americans after a two-year pause, while officials warn that people who receive those letters shouldn’t ignore them.

In late 2023, the agency said that it would resume sending the letters starting in January 2024. They’re not audit requests, the IRS has said, but they are known as an “LT38 Notice,” which is an update to remind taxpayers about their outstanding balance and options to resolve the debt to the federal government.

“Taxpayers are urged to first read the notice carefully, then if there are any questions call the number on the notice itself,” Luis Garcia, a spokesperson for the IRS, told the Detroit Free Press last week, adding that more than 3.7 million taxpayers in the collection system will receive the reminder letters this year.

Late last year, the IRS confirmed in a release that the letters will be sent to people with tax debts before the tax year 2022 and to tax-exempt organizations, businesses, as well as trusts and estates that had tax debts before 2023.

“These notices and letters were previously paused due to the pandemic and high inventories at the IRS but will gradually resume during the next several months,” the IRS release reads. “Current tax year 2022 individual and third quarter 2023 business taxpayers began receiving automated collection notices this fall as the IRS took steps to return to business as usual.”

The two-year pause in letters being sent out was related to the pandemic, and it “meant that some taxpayers who have long-standing tax debt have not received a formal letter or notice from the IRS in more than a year while some of this older collection work has been paused,” it said. “To help the taxpayers in this category as the normal processes resume, the IRS will issue a special reminder letter to them starting next month.”

Those letters will tell the taxpayer about their liability” and will tell the taxpayer to contact the agency as soon as possible to make arrangements to settle the debt. According to the news release, recipients are urged to “carefully read any letter or notice they receive” before contacting the agency.

“After receiving the reminder mailing, these taxpayers with long-standing unresolved tax issues will receive the next notice, informing them of a more serious step in the tax collection process,” it stated.

The IRS said it’s also waiving failure-to-pay penalties for certain taxpayers affected during the tax years 2020 and 2021, estimating that some 5 million tax returns are eligible for the penalty relief.

Some tax professionals noted that taxpayers should take heed of the notices and try to deal with them quickly because it can quickly escalate.

“You can’t bury your head and pretend it’ll go away,” Darren Guillot, who previously served as an IRS deputy commissioner, told CNBC several weeks ago, adding that some taxpayers can set up a payment plan on their debt by scanning a QR code. Notably, he said the CP14 notice is the first one the agency sends out, followed by three or four additional letters.

If the IRS sends a final notice, “you can wake up one morning and see money is taken out of your account” to pay the Treasury Department, Daniel Gibson, a tax partner at accounting firm EisnerAmper in New Jersey, told The Messenger earlier this year before the news outlet folded. The final notice is called a “Notice of Intent to Levy.”

“If you don’t pay the amount due immediately, the IRS can levy your income and bank accounts, as well as seize your property or your right to property, including your state income tax refund to pay the amount you owe,” the IRS says on its website.