IRS CP14 notices interrupt summer plans

July 12, 2018 : Annelise Wiens

Summertime means trips to the pool and the beach, barbecues, vacations and for some, IRS balance due notices. The number of taxpayers who received a refund for 2017 dropped 0.3 percent from the previous year, meaning more people had to send the IRS a tax payment when they filed their taxes earlier this year. And those who didn’t make that payment will be getting an IRS notice CP14 this summer, when the IRS sends more than 4 million taxpayers CP14 balance due notices. The extension applies to filing a completed tax return, not to paying any taxes due the IRS.

In addition to reminding taxpayers they have a balance due, the IRS CP14 notices also explain and assess the penalty for not paying in full by the filing deadline. The failure-to-pay penalty is 0.5 percent of the taxes due each month they go unpaid, maxing out at 25 percent.

Many of these notices also include an estimated tax penalty for not withholding enough in taxes or not making quarterly estimated tax payments. Taxpayers are required to make their tax payments throughout the year when they make their income.

“The number of taxpayers who face estimated tax penalties has increased more than 30 percent since 2010. Last year, 9.8 million taxpayers owed estimated tax penalties,” said Jim Buttonow, director of Tax Audit & Notice Services for H&R Block. “As more taxpayers are entering the gig economy and have to make tax payments instead of relying on withholding traditionally done by employers, they often end up with a balance owed when filing.”

The possibly good news, according to Buttonow, for anyone receiving an IRS CP14 balance due notice is that the IRS is not always correct. A Second Look for any missing credits or deductions could reduce taxes and maybe even lead to a refund. If so, an option is to file an amended return.

Even if the notice is correct, there are several options to pay and even an opportunity to reduce penalties:

  • Ask for more time. Taxpayers can get a little more time (up to 120 days) to get all the money together to pay the IRS. Call the IRS and simply request an extension. Make sure to ask the IRS for the full payoff amount at the end of 120 days to avoid being left with any balances.
  • Consider different payment plans.For those who can’t pay a portion or all of the full amount within 120 days, there are different payment plans (called installment agreements), and other options like deferred payment (called currently not collectible status) or settlement (called offer in compromise) for people in hardship situations. Remember that getting into the right agreement is critical to avoid liens and levies, because liens go on public records, and levies take money from wages or bank accounts.
  • Reduce or erase penalties. Taxpayers who haven’t gotten a failure-to-pay penalty in the past three years may be able to ask for first-time penalty abatement. Just call the IRSand request this penalty relief. On the other hand, the estimated tax penalty doesn’t qualify for first-time penalty abatement. A tax professional can help find another penalty relief

A qualified tax professional can help taxpayers determine what’s best for their unique situation — and even represent them before the IRS. Learn more about H&R Block Tax Audit & Notice Services

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Annelise Wiens

Former Editor and Producer

As the former newsroom editor, Annelise Wiens was interested in more than just tax and industry news, but the stories of H&R Block's 80,000 associates, their communities and H&R Block's world headquarters in Kansas City, Mo. Wiens joined H&R Block in 2014 from a public relations agency, where she worked with clients in the financial services industry. Before that, she worked as a communicator for a senior member of the United States House of Representatives. She graduated from Biola University in La Mirada, CA with a bachelor's degree in history.

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