IRS Letter 2318C: What Is It and How Should You Respond?
Summary:
Letter 2318C is sent by the IRS when there is an issue with the Payroll Deduction Agreement (Form 2159). This letter usually indicates that the form is incomplete or contains errors that need to be corrected to continue processing the installment agreement. Taxpayers receiving this letter should review the provided instructions and take prompt action to ensure their installment plan remains active.
Receiving an IRS letter can cause anxiety, especially if you’re unsure of what it means. Letter 2318C informs taxpayers about an incomplete or incorrect Payroll Deduction Agreement (Form 2159). This form is used to set up an installment agreement, allowing taxpayers to pay their tax liability through automatic payroll deductions. If you’ve received this letter, it’s important to address the issues quickly to avoid complications with your payment plan. In this article, we’ll explain everything you need to know about Letter 2318C and what steps to take if you receive one.
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What is IRS letter 2318C?
IRS Letter 2318C is a notice sent to taxpayers regarding an issue with their Payroll Deduction Agreement (Form 2159). This form allows the IRS to deduct payments automatically from the taxpayer’s wages to pay off outstanding taxes in installments. When the IRS identifies a problem with this agreement, such as missing information, errors, or incomplete forms, they issue Letter 2318C to inform the taxpayer of the necessary corrections.
Why the IRS issues letter 2318C
The IRS sends Letter 2318C when the Payroll Deduction Agreement (Form 2159) is not complete or has errors. Common reasons include:
- Incomplete information on Form 2159.
- Incorrect financial or personal details.
- Missing signatures from either the taxpayer or their employer.
- Discrepancies between the taxpayer’s payroll and the payment schedule requested.
This letter serves as a prompt to correct the issue so that the installment agreement can move forward without delays.
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.
How letter 2318C impacts your installment agreement
When you receive Letter 2318C, it means the IRS is unable to proceed with your payroll deduction installment agreement until you correct the issue. If you fail to address the problem outlined in the letter, several things could happen:
- Payment delays: Your scheduled payments may not start or may be interrupted until the form is corrected.
- Defaulting on the agreement: Continued delays or failure to correct the form could cause the IRS to void the installment agreement.
- Additional penalties: If your payments are delayed, penalties and interest on your unpaid taxes could accumulate.
Acting promptly to resolve the issues with your Payroll Deduction Agreement is essential to maintaining your installment agreement and avoiding further complications.
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Steps to take after receiving letter 2318C
When you receive Letter 2318C, it’s important to act quickly to resolve the issue and ensure your installment agreement remains in good standing. Here are the key steps to follow:
- Review the letter carefully: Read through the entire notice to understand the specific reason why your Payroll Deduction Agreement was rejected or deemed incomplete.
- Check Form 2159 for errors: Look over the Payroll Deduction Agreement (Form 2159) for any missing or incorrect information, such as incomplete fields, wrong tax year, or discrepancies in payroll details.
- Contact your employer: If the form requires an employer signature or details, make sure your employer completes their section accurately. Any errors on their part must also be corrected.
- Submit corrections promptly: After reviewing the form and making the necessary corrections, resubmit it to the IRS as per the instructions provided in the letter.
Ensuring all information on Form 2159 is correct and complete will help you avoid delays in starting your installment agreement.
Pro Tip
Keep copies of all correspondence with the IRS, including forms, letters, and payment confirmations. This will be crucial if you need to reference them later.
Common reasons for receiving letter 2318C
There are several reasons why taxpayers may receive Letter 2318C. Understanding these common causes can help you avoid issues when setting up an installment agreement:
1. Missing or incorrect employer information
Since the Payroll Deduction Agreement involves your employer facilitating automatic deductions, missing or incorrect employer details can trigger Letter 2318C. Ensure your employer completes their section of the form correctly, including their Employer Identification Number (EIN) and payroll information.
2. Signature errors
Both the taxpayer and their employer must sign Form 2159. If either party forgets to sign, the form will be rejected, and you will receive Letter 2318C. Double-check that all required signatures are in place before submitting the form.
3. Inaccurate payment schedule
Form 2159 asks you to outline the payment schedule for your installment agreement. If the payment amounts, frequency, or start date are incorrect or unrealistic based on your payroll, the IRS may reject the form and issue Letter 2318C.
How to resolve letter 2318C issues
To resolve the issues outlined in Letter 2318C, you must provide the IRS with a corrected or completed Payroll Deduction Agreement (Form 2159). Here’s a step-by-step guide on how to address the notice:
1. Review the error details
The letter will specify the problem with the original Form 2159 submission. Carefully review this section to understand what went wrong and what needs to be corrected.
2. Correct the form
Make the necessary corrections on Form 2159, ensuring all information is accurate and complete. Be sure to check for:
- Missing fields.
- Incorrect employer details.
- Properly signed sections by both the taxpayer and the employer.
3. Resubmit the form to the IRS
Once all corrections are made, submit the form according to the instructions provided in Letter 2318C. You can typically mail it to the IRS address listed on the notice.
Pro Tip
Consult a tax professional if you’re unsure about correcting Form 2159. A small mistake could delay your installment plan and lead to penalties.
How to prevent issues with your payroll deduction agreement
To avoid receiving Letter 2318C in the future, here are some best practices for submitting a Payroll Deduction Agreement:
- Double-check all details: Before submitting Form 2159, review all the information to ensure there are no missing or incorrect details.
- Work closely with your employer: Make sure your employer provides accurate information, including their EIN, and signs the form on time.
- Submit forms promptly: Don’t wait until the last minute to submit your Payroll Deduction Agreement, as delays can lead to payment interruptions and IRS notices.
What happens if you don’t respond to letter 2318C?
Ignoring Letter 2318C can lead to several negative consequences:
- Your installment agreement will not go into effect, meaning you may be subject to penalties and interest on unpaid taxes.
- Failure to resolve the issue could result in defaulting on your tax payments, which could lead to wage garnishments, liens, or other enforcement actions by the IRS.
Responding promptly to the letter ensures that you stay compliant with your tax obligations and avoid costly penalties.
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Frequently asked questions
What should I do if my employer refuses to sign Form 2159?
If your employer refuses to sign Form 2159, you won’t be able to proceed with the payroll deduction agreement. In this case, you can explore other IRS payment plan options, such as direct debit, credit card payments, or setting up an installment agreement through the IRS website. You can also contact the IRS to discuss alternative arrangements for your tax payments.
Can I submit Form 2159 online?
No, Form 2159 cannot be submitted online. This form requires the employer’s signature and submission by mail. You will need to fill out the form, obtain your employer’s signature, and mail it to the IRS address provided in Letter 2318C or as instructed by the IRS.
What happens if I can’t correct and return Form 2159 within the time frame?
If you are unable to correct and return Form 2159 within the time frame specified in Letter 2318C, your installment agreement may be delayed or canceled. It’s important to contact the IRS as soon as possible to explain your situation and request an extension if necessary. The IRS may allow you additional time to resolve the issue or offer other payment options.
Can I modify the payment terms after submitting Form 2159?
Once Form 2159 is submitted and approved, it is possible to modify your payment terms, but you must contact the IRS directly to discuss your situation. Depending on your circumstances, the IRS may allow you to adjust the payment amounts or schedule. Keep in mind that any modifications must still comply with the installment agreement guidelines.
What should I do if I receive a second Letter 2318C after resubmitting Form 2159?
If you receive a second Letter 2318C after resubmitting Form 2159, it indicates that there may still be unresolved issues with your payroll deduction agreement. Review the new letter carefully to identify any additional corrections that are needed. If you’re unsure about the errors, contact the IRS directly or consult with a tax professional to ensure that the form is properly filled out and submitted.
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
- Letter 2318C is sent by the IRS when there is an issue with the Payroll Deduction Agreement (Form 2159), such as incomplete information or errors.
- Common reasons for receiving this letter include missing employer details, incorrect payment schedules, or missing signatures.
- It’s important to act promptly by reviewing the letter, correcting the form, and resubmitting it to the IRS to avoid delays or penalties.
- Failure to respond to Letter 2318C can lead to penalties, interest on unpaid taxes, or the voiding of your installment agreement.
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