CP771 Notice: IRS Reminder About Unpaid Taxes
Summary:
The CP771 notice is an IRS reminder about outstanding tax debt, including penalties and interest. This notice is sent to individuals and businesses that owe money to the IRS and serves as a prompt to settle the balance. The notice outlines how much you owe, provides payment options, and emphasizes the importance of addressing the debt to avoid further penalties and interest. In this article, we’ll break down what CP771 means, how to handle it, and what steps to take if you can’t pay the balance immediately.
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Receiving a CP771 notice from the IRS can be alarming, especially if you’re unsure about what it entails or how to resolve it. This notice serves as a reminder that you owe money for unpaid taxes, penalties, and interest. If you don’t respond promptly, you could face additional penalties, increased interest, and even enforcement actions like liens or levies. In this article, we’ll explain the CP771 notice in detail, provide guidance on the steps to take when you receive one, and explore your options if you’re unable to pay the full amount right away.Get Competing Personal Loan Offers In Minutes
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What is the CP771 notice?
The CP771 notice is issued by the IRS to notify taxpayers that they have unpaid tax debt, including fines and interest. It acts as a formal reminder and outlines the total amount owed. This notice serves as a precursor to more serious collection actions if the debt is not settled or payment arrangements are not made promptly.
Typically, the CP771 is sent to both individual taxpayers and businesses with outstanding balances, and it includes:
- The total amount owed in taxes, penalties, and interest.
- A breakdown of the due amount.
- Instructions on how to resolve the debt.
Ignoring a CP771 notice can lead to increased penalties, accruing interest, and possible enforcement actions, such as wage garnishments or property liens.
How does a CP771 notice affect you?
When you receive a CP771 notice, it indicates that the IRS is formally reminding you about your outstanding debt. This notice is a crucial step in the IRS’s collection process. It’s important to understand how it impacts your finances and future dealings with the IRS.
Impact on future tax returns
If you owe taxes and haven’t responded to the IRS, your future tax returns could be affected. For instance, any refunds you’re eligible for may be offset against your debt. The IRS has the authority to apply future tax refunds towards your outstanding balance until the debt is fully paid.
Additional penalties and interest
The CP771 notice also means that penalties and interest will continue to accumulate until you settle the balance. The IRS charges interest daily on unpaid amounts, which can significantly increase the total you owe if you delay payment. Late payment penalties, which can be as high as 25% of the unpaid taxes, may also be applied.
Risk of IRS enforcement actions
If you fail to respond to the CP771 notice or make payment arrangements, the IRS may escalate its collection efforts. This can include more serious actions like wage garnishments, bank levies, and federal tax liens. In some cases, the IRS may even seize your property or other assets to satisfy the debt.
What should you do when you receive a CP771 notice?
Upon receiving a CP771 notice, it’s important to act quickly to avoid further complications. Here’s a step-by-step guide on what you should do:
- Review the notice carefully: Ensure that the amount the IRS claims you owe is accurate. Compare the details in the notice with your tax records to check for any discrepancies.
- Verify the total amount owed: The notice will provide a breakdown of the debt, including any penalties and interest. If you’re unsure about any part of it, contact the IRS for clarification.
- Check your payment options: The IRS offers several payment options, including lump-sum payments, installment agreements, and offers in compromise (OIC) if you can’t afford to pay the full amount.
- Contact the IRS if you cannot pay in full: If you’re unable to pay the balance in full, reach out to the IRS to discuss payment plans or options to reduce the debt.
- Consider seeking professional help: If you’re overwhelmed by the situation or believe there’s been a mistake, it may be wise to consult a tax professional, such as a CPA or a tax attorney, who can help you navigate the process and negotiate with the IRS on your behalf.
Pro tip
- Set up a payment plan early: If you know you can’t pay your tax debt in full, contact the IRS as soon as possible to set up an installment agreement. Early action can prevent penalties from increasing and stop interest from compounding.
How to respond to a CP771 notice
Steps to take when responding
When responding to the CP771 notice, follow these essential steps:
- Gather all documentation: Ensure you have all relevant tax documents, including the notice itself, tax returns, and any previous correspondence with the IRS.
- Contact the IRS: You can reach the IRS through the phone number provided on the CP771 notice or use their online tools to get more information about your case. Discuss payment options or ask for clarification if needed.
- Set up a payment plan: If you’re unable to pay the full amount, consider requesting an installment agreement. This will allow you to make monthly payments over time.
- Explore other debt resolution options: If you’re in severe financial hardship, you may be eligible for an offer in compromise, where the IRS agrees to settle the debt for less than the full amount owed.
Other ways to handle a CP771 notice
If you believe the debt is due to a mistake, or if you can’t afford to pay, you may need to explore other resolution options, including:
- Disputing the amount: If you believe the debt amount is incorrect, you can request a review by the IRS.
- Offer in Compromise (OIC): This allows you to settle your tax debt for less than what you owe, but only if you meet the IRS’s strict eligibility criteria.
- Currently Not Collectible (CNC) status: If paying your tax debt would cause significant financial hardship, you may be able to have your account marked as currently not collectible, which pauses collection activities.
Pro tip
- Keep records of all communications: Maintain copies of every letter you send to or receive from the IRS, along with records of phone calls and payments. Good documentation can help you resolve any disputes or issues quickly.
Further support options for addressing the CP771 notice
If you’re unsure about how to proceed after receiving a CP771 notice, there are several resources you can turn to for assistance:
- Consult a tax professional: Certified tax professionals, including CPAs, enrolled agents, or tax attorneys, can provide valuable guidance in resolving your tax debt.
- Use the IRS website: The IRS website has a wealth of information, including FAQs, forms, and detailed instructions on how to handle various tax situations, including payment plans and debt settlements.
- Taxpayer Advocate Service (TAS): If you’re having trouble resolving your issue, the Taxpayer Advocate Service offers free assistance to help you navigate through IRS processes.
Potential penalties or next steps if you don’t respond
Ignoring a CP771 notice can lead to serious consequences. Here are some potential penalties and next steps if you fail to take action:
- Increased interest and penalties: The longer you wait to respond, the more interest and penalties will accrue, increasing the total amount you owe.
- Liens and levies: The IRS has the authority to place a lien on your property or levy your bank account to collect the unpaid debt.
- Wage garnishments: The IRS may garnish your wages, meaning they’ll take a portion of your paycheck each pay period to satisfy your debt.
- Legal action: In extreme cases, the IRS can escalate the issue and take legal action to recover the debt, which could include seizing assets.
Pro tip
- Consult a tax professional: If you’re unsure about how to resolve the debt or if the situation becomes complicated, consult a CPA, enrolled agent, or tax attorney. A professional can guide you through IRS negotiations and help you get the best possible outcome.
What potential outcomes are possible?
Once you respond to the CP771 notice, several outcomes are possible, depending on your situation and the actions you take:
- Full payment: If you pay the full amount owed, the IRS will close the case, and you will avoid further penalties and interest.
- Payment plan approval: If you set up a payment plan, you’ll be required to make monthly payments until the debt is settled. Interest will continue to accrue, but penalties may be reduced.
- Offer in compromise acceptance: If you qualify for an offer in compromise and the IRS accepts your proposal, you’ll be able to settle your debt for less than the full amount owed.
- Currently Not Collectible status: If you demonstrate that paying the debt would cause severe financial hardship, the IRS may grant you temporary relief by marking your account as “currently not collectible.”
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Frequently asked questions
Why did I receive a CP771 notice?
You received a CP771 notice because the IRS has determined that you have unpaid tax debt. This notice serves as a reminder to pay the outstanding balance before additional penalties and interest are applied.
How can I pay my tax debt?
You can pay your tax debt in several ways, including a lump-sum payment, an installment agreement, or through an offer in compromise if you qualify. The CP771 notice provides instructions on how to make payments.
What happens if I ignore the CP771 notice?
Ignoring the CP771 notice will result in additional interest and penalties being added to your debt. The IRS may also take enforcement actions like placing a lien on your property or garnishing your wages.
Can I dispute the amount owed?
Yes, if you believe the IRS made a mistake or that the amount stated on the CP771 notice is incorrect, you can contact the IRS to request a review or dispute the amount. Be sure to gather supporting documentation, such as prior tax returns and relevant correspondence, to strengthen your case when disputing the amount owed.
What should I do if I can’t afford to pay the full amount?
If you cannot afford to pay the entire debt, you have several options. You can request an installment agreement to make monthly payments, apply for an Offer in Compromise (OIC) to potentially settle for less, or ask the IRS to consider you for Currently Not Collectible (CNC) status if paying would cause financial hardship.
How long do I have to respond to the CP771 notice?
The CP771 notice typically includes a deadline by which you must respond. It’s crucial to act quickly—preferably before the due date on the notice—to avoid further penalties and interest. If you need more time, contacting the IRS for assistance or requesting a payment plan can help prevent additional consequences.
Need help understanding other IRS letters and notices? Visit our comprehensive guide to IRS Letters and Notices or search for the document you received in the table below.
| CP01 | The IRS verified your claim of identity theft and will monitor your account. |
| CP01H | The IRS received a tax return with a social security number that belongs to a dead person. |
| CP02H | Money is due on an amended return based on a grant received due to Hurricane Katrina, Rita, or Wilma. |
| CP03C | You received the First-Time Homebuyer Credit for a house you purchased. |
| CP04 | You may be eligible for tax deferment because either you or a spouse served in a combat zone, a qualified contingency operation, or a hazardous duty station during the tax year specified on your notice. |
| CP08 | You may be entitled to additional money due to the Additional Child Tax Credit. |
| CP10 | Your tax return changed due to a miscalculation, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP10A | Your tax return changed due to a miscalculation of the Earned Income Credit, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP11 | You owe money because the IRS amended your return due to a miscalculation. |
| CP11A | Your tax return changed due to a miscalculation of the Earned Income Credit, and the refund you wanted to apply to an estimated tax payment also changed. |
| CP11M | Your tax return changed due to a miscalculation of the Making Work Pay and Government Retiree Credit, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP12 | You are due a bigger refund because the IRS corrected one or more mistakes on your tax return. |
| CP12A | The IRS made changes to correct the Earned Income Credit (EIC) claimed on your tax return. |
| CP12E or CP12F | The IRS corrected a miscalculation on your return. |
| CP12M | The IRS made changes to the computation of the Making Work Pay and/or Government Retiree Credits on your return. |
| CP12R | The IRS made changes to the computation of the Rebate Recovery Credit on your return. |
| CP13 | The IRS made changes to your return due to a miscalculation. There is no refund or amount due. Your balance is zero. |
| CP13A | The IRS made changes to your return due to a miscalculation of the Earned Income Credit. There is no refund or amount due. Your balance is zero. |
| CP13M | The IRS made changes to your return due to a miscalculation of the Making Work Pay credit or the Government Retiree Credit. There is no refund or amount due. Your balance is zero. |
| CP13R | The IRS made changes to your return due to a miscalculation of the Recovery Rebate Credit. There is no refund or amount due. Your balance is zero. |
| CP14 | You owe money on unpaid taxes. |
| CP16 | The IRS made changes to your return due to a miscalculation. The refund you were due was applied to other tax debts. |
| CP21A | You owe money due to the changes you requested that the IRS make on your tax returns. |
| CP21B | You are due a refund due to the changes you requested that the IRS make on your tax returns. The money should arrive within 2 to 3 weeks. |
| CP21C | The IRS made the requested changes to your tax return. You will not receive a refund, and there is no tax due. Your balance is zero. |
| CP21E | As a result of your recent audit, the IRS made changes to your tax return, and you owe money as a result of those changes. |
| CP21I | The IRS made changes to your tax return relating to the Individual Retirement Arrangement (IRA) taxes. You owe money due to the changes. |
| CP22A | The IRS made the changes you requested, and you owe money as a result. |
| CP22E | As a result of your recent audit, the IRS changed your tax return, and you now owe money. |
| CP22I | The IRS made changes to your tax return relating to the Individual Retirement Arrangement (IRA) taxes. You owe money due to the changes. |
| CP23 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. You owe taxes due to these changes. |
| CP24 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. This resulted in an overpayment of estimated taxes. |
| CP24E | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. This resulted in an overpayment of estimated taxes. |
| CP25 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. You are not due a refund, nor do you owe any money. Your balance is zero. |
| CP31 | You need to update your address because your refund check was returned to the IRS. |
| CP45 | The IRS was unable to apply your overpayment to your estimated tax as you requested. |
| CP49 | The IRS used all or part of your refund to pay a tax debt. |
| CP53 | Your refund check will be sent by mail because the IRS can’t provide your refund through direct deposit. |
| CP57 | The bank declined your payment, so the IRS was unable to draft funds from your bank account. |
| CP71 | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71A | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71C | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71D | A reminder of the amount you owe in tax, penalty, and interest. |
| CP88 | The IRS is holding your refund because you haven't filed one or more tax returns, and it believes you will owe tax. |
| CP90 | The IRS is notifying you of its intent to levy certain assets for unpaid taxes. You have the right to dispute the levy in a Collection Due Process hearing. |
| CP91 | The IRS will levy up to 15% of your social security benefits for unpaid taxes. |
| CP120 | The IRS needs documentation of your tax-exempt status. |
| CP120A | Your organization’s tax-exempt status has been revoked because it failed to file a Form 990 series return for three consecutive years. |
| CP130 | You may no longer need to pay the Alternative Minimum Tax (AMT) because your tax return filing requirements changed. |
| CP152 | The IRS received your return. |
| CP153 | The IRS will send your refund by mail because your direct deposit did not go through. |
| CP161 | You have an unpaid balance due to the IRS. |
| CP166 | Your monthly payment to the IRS did not go through due to insufficient funds in your bank account. |
| CP178 | You may no longer owe excise tax because your tax return filing requirements changed. |
| CP231 | You need to update your address because your refund was returned to the IRS. |
| CP259 | You did not file the business tax return identified in the notice. |
| CP259A | You should have filed these forms but did not – Form 990/990-EZ, Return of Organization Exempt From Income Tax, or Form 990-N (e-Postcard). |
| CP259B | The IRS requires you to file these forms but did not – Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. |
| CP259C | The IRS believes that you are a private foundation, but did not file the required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. |
| CP259D | You must file this form, but you did not – Form 990-T, Exempt Organization Business Income Tax Return. |
| CP259E | You should have filed this form, but you did not – Form 990-N (e-Postcard) or Form 990/990-EZ, Return of Organization Exempt From Income Tax. |
| CP259F | The IRS requires you to file this form but did not – Form 5227, Split-Interest Trust Information Return. |
| CP259G | The IRS requires you to file this form, but you didn’t – Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations. |
| CP259H | As a tax-exempt political organization, you must file this form, but you did not – Form 990/990-EZ, Return of Organization Exempt From Income Tax. |
| CP276A | You submitted your tax liability schedule incorrectly. The IRS typically charges a Federal Tax Deposit (FTD) penalty for this but did not this time. |
| CP276B | The IRS did not receive the correct amount of tax deposits. It normally charges a Federal Tax Deposit (FTD) penalty but did not this time. |
| CP297 | The IRS is notifying you of its intent to levy certain assets for unpaid taxes. You have the right to dispute the levy at a Collection Due Process hearing. |
| CP297A | The IRS has levied your assets for unpaid taxes. You have the right to dispute the levy at a Collection Due Process hearing. |
| CP298 | The IRS notifying you of its intent to levy up to 15% of your social security benefits for unpaid taxes. |
| CP501 | You have a balance due on one of your tax accounts. |
| CP503 | You have an unpaid balance on one of your accounts, and the IRS has not heard from you. |
| CP504 | You have an unpaid amount due on your account. If you do not pay immediately, the IRS will levy your state income tax refund to apply it to the amount you owe. |
| CP504B | You have an unpaid amount due on your account. If you do not pay immediately, the IRS will levy certain property or rights to property to apply it to the amount you owe. |
| CP521 | A reminder that you have an installment agreement payment due. |
| CP523 | You have defaulted on your payment agreement. Therefore the IRS is terminating the agreement and will levy your assets. |
| CP601 | Usted tiene un saldo pendiente de pago (dinero que le debe al IRS) en una de sus cuentas contributivas. |
| CP603 | No hemos recibido respuesta de parte de usted y todavía tiene un saldo sin pagar en una de sus cuentas contributivas. |
| CP604 | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará cualquier reembolso de impuestos estatales al que tenga derecho y aplicarlo al pago de su deuda. |
| CP604B | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará ciertas propiedades o derechos de propiedad y lo aplicará al pago de su deuda. |
| CP621 | Este aviso es para notificarle que usted tiene un plan de pagos a plazos vencido. Por favor, envíe el pago inmediatamente. |
| CP623 | Este aviso es para informarle nuestra intención de cancelar su plan de pagos a plazos y confiscar (embargar) sus bienes. Usted incumplió en su acuerdo. |
| CP711 | Nosotros realizamos cambios a su planilla debido a que entendemos que hubo un cálculo erróneo. Como resultado de estos cambios, usted adeuda dinero por sus contribuciones. |
| CP721 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. |
| CP722 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. |
| CP771 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP772 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP773 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP774 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP959 | Usted no radicó su planilla de contribución de negocios identificada en este aviso. |
| CP2000 | The income or payment information on file doesn’t match your tax return. The discrepancy may result in an increase or decrease in your tax due. |
| CP3219A | The IRS has received information that is different from what you reported on your tax return. This may result in an increase or decrease in your tax. |
| CP3219N | The IRS didn’t receive your tax return, so it calculated your return based on the information received from employers, financial institutions, and others. If you want to challenge the proposed tax, you have 90 days from the date of this notice. If you are outside the country, you have 150 days. |
| Letter 0012C | The IRS needs additional information to process your tax return. |
| Letter 0484C | The IRS wants a completed |
| Letter 0525 | Updates you on proposed changes after an IRS examination. Any changes are explained and details the refund due or taxes owed. |
| Letter 531 | IRS Notice of Deficiency. The information the IRS received about you was different from what you reported on your return. |
| Letter 0668D(LP 68) | The IRS released their levy. |
| Letter 0549C | Your tax bill was paid. |
| Letter 0681C | The IRS accepted your payment proposal. However, this is not a formal Installment Agreement. |
| Letter 0757C | You did not adhere to the terms of your Installment Agreement. |
| Letter LT 11 | The IRS plans to seize your property or rights to property. |
| Letter 1058 | The IRS has not received your payment. It plans to seize your property or rights to property. |
| Letter 1615 (LT 18) | You must respond to the IRS within 10 days of this notice regarding past due tax returns. |
| Letter 1737 (LT 27) | Complete and sign Form 433F, Collection Information Statement. |
| Letter 1961C | Your application for a Direct Debit Installment Agreement was declined. It explains why and what you need to do to qualify. |
| Letter 1962C | Your application for a |
| Letter 2050 (LT 16) | The IRS is trying to collect unpaid taxes from you from returns that have been filed or from returns that have not been filed. |
| Letter 2257C | The IRS is providing the payoff amount that you requested. |
| Letter 226-J | An IRS letter to large employers notifying them that they may be liable for an Employer Shared Responsibility Payment (ESRP). |
| Letter 2271C | A request for an Installment Agreement has been approved. It explains the fees and how to qualify for a Low Income Fee Reduction. The letter may also request missing information. |
| Letter 2272C | An IRS letter explaining why your request to pay the balance due in installments was declined. |
| Letter 2273C | A confirmation letter of your request to pay the balance due in installments. It contained the amount to pay, fees charged, and where to send payment. Instructions on how to apply for the Low Income Fee Reduction included. |
| Letter 2318C | A response to a request to pay taxes due to payroll deductions. It also explains the fees that are charged. |
| Letter 2357C | The IRS is admitting that it did not send you the balance due notices that it should have. |
| Letter 2603C | The IRS accepted your installment agreement. The IRS will file a Notice of Federal Tax Lien on your personal property. |
| Letter 2604C | The IRS has accepted your request for installment payments. This IRS letter provides the monthly payment, the address where to send it, and the fees charged. The letter also provides instructions on how to apply for the Low Income Fee Reduction. |
| Letter 2761C | The IRS is requesting your combat zone service dates to ensure that it provides you with the special provisions and protection of the combat zone deferment. Copies of military orders or other documentation to support your time served may be requested. Civilians working in support of the Armed Forces may be required to provide a Letter of Authorization or a letter from their employer. |
| Letter 2789C | An annual reminder notice, as required by law, of the balance due to the IRS. It explains that penalties and interest continue to accrue until the balance is fully paid. |
| Letter 2840C | Confirms your Installment Agreement request and includes the payment amount and due date. This IRS letter explains the fees charged for paying monthly and explains how to apply for the Low Income Fee Reduction (if you qualify). |
| Letter 3030C | Provides an explanation of the tax, penalty, and interest still due on your account. |
| Letter 3127C | A confirmation of your request to make a change to your Installment Agreement. This IRS letter explains the fees for the change. Changes can be to the payment amount or due date, or it can include additional liabilities. |
| Letter 3174 | A reminder of taxes due after the IRS has sent a Notice of Intent to Levy. |
| Letter 3217C | The IRS has accepted your request to pay the balance in installments. This IRS letter provides your payment amount, the due date, and fees charged. The letter also provides instructions on applying for the Low Income Fee Reduction (if you qualify). |
| Letter 3228 (LT 39) | A request to pay the balance due within 10 days using the envelope provided. |
| Letter 3500 | The IRS has received your documents, and it needs additional time to review them. |
| Letter 3572 | Your Federal Income Tax Return has been selected for examination. The IRS auditor requests that you call to schedule an audit appointment. |
| Letter 4883C | The IRS received your federal income tax return but needs more information to verify your identity in order to process your tax return accurately. |
| Letter 4903 (LT 26) | You must file your tax returns immediately. The IRS has previously contacted you, but it did not receive a response. |
| Letter LP 47 | The IRS is trying to locate the person identified in the letter and is requesting that you provide their new address. |
| Letter LP 59 | The IRS has not received a response to the notice of levy it previously sent. |
| Audit Letter 2205 | The IRS manages audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or the taxpayer’s home, place of business, or accountant’s office (field audit). |
| Letter 915 | You recently underwent an audit, and the IRS informs you that you now owe taxes. |
Key takeaways
- The CP771 notice is an IRS reminder regarding unpaid tax debts, including fines and interest.
- Ignoring the notice can result in penalties, interest accrual, and serious enforcement actions like wage garnishments or liens.
- You can address the notice by paying in full, setting up a payment plan, or exploring other debt relief options like an Offer in Compromise.
- Seeking professional help from a tax attorney, CPA, or taxpayer advocate can guide you through the process if you feel overwhelmed.
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