Confidently seize control of your financial situation and tackle these notices head-on

With the lifting of the COVID-19 emergency restrictions in May 2023, the IRS has announced its plan to resume collection activities and increase the issuance of “Balance Due” notices. During the pandemic, the IRS temporarily suspended certain compliance actions, including issuing lien and levy notices, to relieve taxpayers facing financial challenges. Reports suggest that the IRS is preparing to send out a large number of CP-14 notices, with estimates ranging from five to eight million.

If you have received a “Balance Due” notice from the IRS, it is crucial to take immediate action to resolve the issue. Ignoring the notice can result in higher penalties and interest rates, so exploring your options and finding a suitable solution is recommended.

The IRS offers different methods and plans for handling tax debt, along with advice on how to avoid receiving similar notifications in the future by engaging in proactive tax planning and following tax regulations.

Option 1: Pay the Entire Tax Balance

The most straightforward option is to pay the total amount stated on the notice. Consider your financial situation and weigh the cost of other alternatives against paying in full. Keep in mind that if you choose not to pay, the IRS will apply a current interest rate of 7%.

To pay in full:

  1. Check the payoff amount on the CP14 notice and utilize the convenient IRS Direct Pay option on If you choose to pay by other means, closely monitor the payment’s status, as processing delays can occur.
  2. Note that the IRS currently takes around two to three weeks to process checks.
  3. If you cannot pay by the due date stated on the notice, contact the IRS or access your online account for the most up-to-date balance information.

Option 2: Request an Extension for Payment

If you need more time to gather the necessary funds, consider requesting an extension-to-pay agreement with the IRS. The IRS allows an extension of up to 180 days, known as a short-term payment agreement. Taxpayers owing less than $100,000 can use the online IRS payment agreement tool or call the service to arrange this extension.

Once approved, the IRS will send a letter confirming the 180-day extension and the new payoff amount at the end of the 180-day period. During this extension, you can make payments at any time or choose to pay the entire balance by the end of the 180 days. Setting up an extension-to-pay agreement incurs no fee and can help you avoid receiving a notice of federal tax lien. If you cannot pay the full balance by then, contact the IRS to explore alternative options, such as setting up a payment plan.

Option 3: Establish a Simplified Payment Plan

The most commonly chosen option by taxpayers is to establish an IRS payment plan, known as an installment agreement. This type of agreement allows you to make monthly payments toward your tax debt.

Setting up a simplified payment plan has become more convenient in recent years. Taxpayers can utilize the IRS’s online payment agreement tool, which allows you to request an installment agreement and propose your desired monthly payment amount. Alternatively, you can contact the IRS directly to initiate the arrangement by phone.

Option 4: Apply for a Temporary Hardship Status or Currently Not Collectible

In cases where a taxpayer’s financial analysis reveals an inability to pay, they may qualify for currently not collectible (CNC) status. This status temporarily pauses IRS collection activities on the tax bill.

To apply for CNC status, taxpayers typically must provide detailed information about their financial situation to the IRS. This includes disclosing income, expenses, assets and liabilities. The IRS will evaluate this information to determine if the taxpayer meets the temporary hardship criteria and cannot make any meaningful payments toward their tax debt.

Option 5: Settle the Debt with an Offer in Compromise

If you do not have sufficient funds to pay the IRS before the expiration of the statute of limitations to collect, they may consider an offer in compromise (OIC) as a potential solution. Similar to ability-to-pay plans and CNC status, an OIC involves a financial assessment.

The objective of an OIC is to find a middle ground acceptable to both you and the IRS. It involves proposing an amount that represents the maximum you can afford to pay toward your tax debt while considering your current financial circumstances. If the IRS accepts your offer, they will consider the debt settled once the agreed-upon amount is paid.

It’s important to note the IRS evaluates offers in compromise on a case-by-case basis, and not all offers are accepted.

How to Avoid Future “Balance Due” Notices

Receiving a “Balance Due” notice from the IRS can be stressful and burdensome. To avoid such situations in the future, here are some important steps to take:

  1. Review your tax withholding and estimated tax payments: Ensure you withhold the correct amount from your paychecks or make sufficient estimated tax payments throughout the year. This will help you meet your tax obligations and avoid owing a significant amount at tax time.
  2. Stay organized and keep accurate records: Maintain thorough records of your income, expenses, deductions and credits. Organize your financial documents and receipts to make tax preparation smoother and minimize the chances of errors or omissions that could lead to a tax debt.
  3. Seek professional tax advice: Consult a CPA who can provide guidance tailored to your situation. They can help you navigate complex tax laws, maximize deductions, and ensure compliance, reducing the risk of owing a significant amount to the IRS.
  4. Adjust your tax strategy if circumstances change: Life events such as a new job, marriage, divorce or starting a business can impact your tax situation. Stay informed about how these changes may affect your tax liability and make necessary adjustments to your tax strategy accordingly.
  5. Pay estimated taxes if you are self-employed: If you work for yourself or receive income not subject to withholding, it is crucial to make quarterly estimated tax payments to cover your tax liability throughout the year. This can help prevent a large tax bill at the end of the year.

To avoid tax debt and the stress that comes with receiving “Balance Due” notices from the IRS, it is important to engage in proactive tax planning. You can ensure a smoother and more financially secure tax experience by taking appropriate action. Contact an Adams Brown advisor to discuss your situation.