CP861 IRS Notice: What It Means and What to Do
Summary:
The CP861 IRS Notice is sent to taxpayers who have an outstanding tax balance. This notice outlines the amount due, provides details on how it was calculated, and includes instructions for resolving the issue. Taxpayers are advised to compare the notice with their tax records, confirm the accuracy of the payments listed, and address any discrepancies quickly to avoid additional penalties or interest.
Receiving an IRS notice can be concerning, especially when it involves a balance due. The CP861 Notice indicates that the IRS believes you owe taxes, typically resulting from unpaid amounts on your tax return. If you receive this notice, it’s important to act quickly to resolve the issue, avoid accruing penalties, and potentially negotiate payment arrangements. In this article, we’ll explain the CP861 Notice in detail and guide you through the steps you need to take to address it effectively.
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What is the CP861 IRS notice?
The CP861 Notice is issued by the IRS to inform taxpayers about an outstanding balance on their tax account. This notice is a formal communication that alerts you to the amount due, including any penalties and interest that may have accrued. The IRS issues the CP861 to prompt taxpayers to settle unpaid taxes and avoid further complications.
Pro Tip
Set up IRS account alerts online to get real-time notifications on any changes to your tax return or account. This helps you stay updated on adjustments and due dates.
Why the CP861 notice is sent
The IRS sends this notice when it determines that you have unpaid taxes. The balance could arise from a variety of issues, such as:
- Mistakes or underreporting on your tax return.
- Late payments or failure to pay estimated taxes.
- Adjustments made by the IRS after processing your return.
When the IRS finds that the amount you paid does not cover your total tax liability, it calculates the remaining balance and issues the CP861 to request payment.
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Steps to take when you receive a CP861 notice
Upon receiving a CP861 Notice, it is essential to follow these steps to resolve the situation quickly:
1. Read the notice carefully
Start by reading the CP861 Notice thoroughly to understand the details of the amount owed and how it was calculated. The notice will provide a breakdown of the tax balance, interest, and penalties.
2. Compare the notice with your tax records
Check the figures on the notice against your own tax records and the return you filed. This step will help identify any discrepancies or mistakes made in calculating your tax liability.
3. Verify your payments
Ensure that all payments you made to the IRS have been correctly applied to your account. If you notice any missing payments, you may need to provide proof, such as bank statements or canceled checks, to update your account.
4. Contact the IRS if you disagree
If you believe the IRS has made an error, contact the toll-free number on your notice within 10 days. Be prepared to present supporting documentation to make your case, such as payment records or a corrected tax return.
5. Make payment arrangements
If you agree with the amount owed but cannot pay the full balance immediately, contact the IRS to discuss payment options. The IRS offers installment agreements and other payment plans to help you settle your tax debt over time.
Pro Tip
Always keep copies of all correspondence with the IRS, including notices and payment records. This documentation can be crucial if you need to dispute a charge or appeal a decision.
Common reasons for receiving a CP861 notice
Several situations can lead to the issuance of a CP861 Notice. Understanding these reasons can help prevent future tax issues:
1. Incorrect or incomplete tax returns
If your original tax return contains mistakes, the IRS may adjust the amount of tax you owe, leading to an unexpected balance due. Errors may include incorrect income reporting, deductions, or credits.
2. Unpaid estimated taxes
For taxpayers who are self-employed or have other non-wage income, estimated tax payments are required throughout the year. Failing to make sufficient payments can result in a tax debt at the end of the year.
3. IRS adjustments
In some cases, the IRS may audit your return or make adjustments based on additional information, such as third-party reporting from employers or financial institutions. This could result in an increased tax liability.
4. Penalties and interest accrual
If you fail to pay your taxes on time, the IRS will charge penalties and interest on the unpaid balance. This can significantly increase the total amount you owe over time.
How to pay your balance
If you agree with the amount owed, there are several ways to pay the balance due:
1. Pay online
The IRS website provides several online payment options, including Direct Pay, credit or debit card payments, and Electronic Funds Withdrawal. Paying online is the fastest way to settle your tax debt.
2. Mail a check or money order
You can also send a check or money order to the IRS. Make sure to include the payment voucher provided with your CP861 Notice and write your Social Security number or Employer Identification Number on the check.
3. Set up an installment agreement
If you cannot pay the full amount at once, you can request an installment agreement. This allows you to make monthly payments toward your tax debt, with terms varying depending on the amount owed.
What happens if you don’t respond to the CP861 notice?
Ignoring a CP861 Notice can lead to serious consequences:
1. Additional penalties and interest
If you fail to take action, the IRS will continue to charge interest and penalties on your unpaid balance, increasing the total amount due.
2. Collection actions
The IRS has the authority to take enforcement actions, such as garnishing your wages, levying your bank account, or placing a lien on your property.
3. Potential legal consequences
Persistent failure to pay taxes can lead to more severe legal actions, including potential criminal charges in cases of deliberate tax evasion.
Pro Tip
If you can’t pay the full amount, consider requesting an installment agreement as soon as possible. Setting up a payment plan early can help you avoid additional penalties and interest.
Options for resolving your tax debt
If you cannot pay the amount owed, the IRS offers several options for resolving your tax debt:
1. Request an installment agreement
An installment agreement allows you to pay your debt over time. The IRS offers different types of installment plans depending on the amount owed and your financial situation.
2. Submit an offer in compromise
An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount you owe. The IRS may accept an OIC if you can prove that paying the full amount would create financial hardship.
3. Temporarily delay collection
In some cases, the IRS may determine that you are currently unable to pay any amount. If this is the case, they may temporarily delay collection actions until your financial situation improves.
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Frequently asked questions
What should I do if I cannot pay the full amount by the due date?
If you cannot pay the full balance by the due date, contact the IRS to set up a payment arrangement. The IRS offers installment agreements that allow you to make monthly payments on your debt. You may also qualify for an Offer in Compromise, which lets you settle your debt for less than the total amount owed. It is important to reach out as soon as possible to avoid additional penalties and interest.
How do I dispute a penalty or interest charge on the CP861 notice?
To dispute a penalty or interest charge, you should contact the IRS using the phone number provided on your notice. Be prepared to present documentation that supports your claim, such as evidence of timely payments or proof of reasonable cause for late payment. The IRS may waive penalties under certain circumstances if you can demonstrate a valid reason for not meeting your tax obligations on time.
Can I appeal the amount due on the CP861 notice?
Yes, you can appeal the amount due if you disagree with the IRS’s calculations. To begin the appeal process, contact the IRS within the time frame specified on your notice (usually 30 days). You may need to submit additional documents or explanations to support your appeal. If your appeal is successful, the IRS will adjust your account balance accordingly.
Will receiving a CP861 notice affect my credit score?
No, receiving a CP861 Notice will not directly affect your credit score, as the IRS does not report tax debt to credit bureaus. However, if the IRS places a lien on your property due to unpaid taxes, this information could become public and potentially impact your creditworthiness. It’s best to resolve the debt promptly to avoid such consequences.
What happens if I continue to ignore the CP861 notice?
Ignoring a CP861 Notice can lead to serious consequences, including additional penalties and interest accruing on the unpaid balance. If the issue remains unresolved, the IRS may take enforcement actions such as garnishing wages, levying bank accounts, or placing a lien on your property. In extreme cases, persistent non-payment could result in legal actions for tax evasion.
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 CP861 Notice informs taxpayers of an outstanding balance on their IRS account.
- It is crucial to review the notice, compare it with your tax records, and verify that all payments were correctly applied.
- Contact the IRS immediately if you disagree with the amount or need to discuss payment arrangements.
- Ignoring the notice can result in additional penalties, interest, and even legal consequences.
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