What to Do About Your LT40 Notice
Summary:
The LT40 notice is issued by the IRS when the agency is attempting to collect unpaid taxes or retrieve unfiled tax returns from taxpayers. This notice serves as a formal communication from the IRS, informing taxpayers of their intent to contact third parties to verify or gather the taxpayer’s contact information. Receiving this notice can be alarming, but understanding its purpose and knowing the steps to address it can help minimize the stress and resolve the issue efficiently.
Receiving an LT40 notice from the IRS can be an intimidating experience for any taxpayer. The notice typically indicates that you have outstanding tax liabilities or unfiled tax returns, and the IRS is attempting to collect these through a process that may involve contacting third parties. This could mean reaching out to individuals, businesses, or financial institutions to verify your contact information or gather more details about your financial situation. Understanding the LT40 notice, why it was issued, and what steps you can take is crucial for resolving the situation swiftly and minimizing any further complications.
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What is an LT40 notice?
An LT40 notice is an official letter from the IRS, typically sent when a taxpayer has unfiled tax returns or outstanding balances owed. The IRS uses this notice to inform the taxpayer that they are attempting to collect unpaid taxes and may contact third parties, such as employers, financial institutions, or other contacts, to verify or obtain additional information. The goal is to ensure that the IRS can successfully reach the taxpayer to address their tax issues. This notice is part of the IRS’s process of ensuring compliance with federal tax laws.
How the LT40 notice affects you
When you receive an LT40 notice, it means the IRS is actively working to collect unpaid taxes or file missing tax returns. This notice indicates that the IRS is prepared to contact third parties to gather information if they are unable to reach you directly. If you fail to respond to the LT40 notice, you may face further consequences, including penalties, interest on unpaid taxes, or even enforced collection actions, such as wage garnishments or liens on your property. It’s essential to take action as soon as possible to avoid these more severe consequences and resolve your tax situation.
Pro Tip
Consult a tax professional if you’re unsure about how to respond to an LT40 notice. They can provide personalized guidance based on your specific situation and help you navigate the complexities of tax law.
What to do when you receive an LT40 notice
Read the notice carefully
Your first step upon receiving an LT40 notice should be to read it thoroughly. The notice will provide details about your unpaid taxes or missing tax returns and outline the actions the IRS plans to take if you do not respond. Make sure you understand the reason for the notice, the amount you owe, or the tax years for which returns are missing. If there is any confusion or uncertainty, it’s important to seek clarification by contacting the IRS directly using the phone number provided in the notice.
File any missing tax returns
If the notice indicates that you have unfiled tax returns, it is important to address these as soon as possible. Filing the missing returns can help reduce penalties and prevent further enforcement actions. You can find guidance on filing past-due tax returns by visiting the IRS website or consulting a tax professional. The sooner you file, the better your chances of resolving the issue before it escalates.
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Pay your unpaid tax balance
If you owe taxes, the LT40 notice will indicate the amount due. The easiest and fastest way to pay your balance is by using the IRS’s online payment system. Paying the full amount as soon as possible will help stop the accumulation of interest and penalties on your unpaid balance. If you cannot pay the full amount, consider setting up a payment plan with the IRS.
What if you can’t pay the full amount?
If you are unable to pay the full amount stated in the LT40 notice, the IRS offers payment plan options. You may qualify for an online payment agreement if your total tax debt is less than $50,000. This allows you to pay off the balance over time, reducing the immediate financial burden. Additionally, you can apply for an offer in compromise if you are experiencing financial hardship, which allows you to settle your tax debt for less than the total amount owed. However, this option is only available if you meet specific qualifications, and you will need to use the Offer In Compromise Pre-Qualifier Tool on the IRS website to determine your eligibility.
Pro Tip
Document all interactions with the IRS, including dates and names of representatives you speak with. This information can be crucial if you need to escalate your issue or reference previous conversations.
What happens if you ignore the LT40 notice?
Ignoring an LT40 notice from the IRS can lead to serious consequences. If you do not respond, the IRS may escalate its collection efforts, including contacting third parties to obtain your contact information. Failing to address the notice can also result in additional penalties and interest accruing on your unpaid balance. In extreme cases, the IRS may take more severe enforcement actions, such as garnishing your wages, placing liens on your property, or levying your bank accounts.
If you’ve already paid or filed
If you have already filed the missing returns or paid the balance indicated on the LT40 notice, it may take up to 21 days for the IRS to process your payment or filing. During this time, you may still receive communication from the IRS, but if you have complied with the requirements, you should not need to take further action. If your payment was made more than 21 days ago and you are still receiving notices, contact the IRS to confirm that your account has been updated.
Dealing with financial hardship
If you are experiencing financial difficulties and cannot pay your tax debt, you may qualify for special considerations with the IRS. One option is to request that your account be placed in “currently not collectible” status, which temporarily delays collection activities. However, penalties and interest will continue to accrue during this time. Additionally, an Offer in Compromise could be a solution for those facing significant financial hardship. This option allows you to settle your tax debt for a lower amount, but it requires that you meet certain eligibility criteria.
Filing your missing returns
If your LT40 notice indicates that you have unfiled tax returns, it’s important to act quickly. Begin by identifying which tax years are missing and gather the necessary documentation to complete those returns. If you’re unsure about whether you need to file, the IRS offers an online tool called “Do I need to file a tax return?” to help you determine your filing obligations. Even if you are due a refund, you must file any missing returns to claim it. Refunds are only available for three years after the original filing deadline, so timely action is crucial.
Pro Tip
Use the IRS’s online resources, such as their Interactive Tax Assistant, to get quick answers to common questions about your LT40 notice and other tax-related concerns.
How the IRS contacts third parties
The LT40 notice informs you that the IRS may contact third parties, such as employers, financial institutions, or other entities, to verify your contact information or gather other necessary details. The IRS is legally restricted from sharing more information than is necessary to obtain or verify this data. They are required to inform you if they contact any third parties, and you will receive a copy of the contact list if applicable. However, if no contacts are made, you will not receive a list.
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Frequently asked questions
What should I do if I disagree with the amount owed?
If you believe the amount stated in your LT40 notice is incorrect, you should contact the IRS immediately. You can dispute the charges by providing documentation that supports your claim. It’s important to gather any relevant records, such as past tax returns or payment confirmations, to present your case effectively. The IRS may require you to submit a formal appeal, so be prepared to follow their procedures carefully.
How long will it take to resolve issues related to my LT40 notice?
The time it takes to resolve issues associated with an LT40 notice can vary widely depending on several factors, including the complexity of your situation and the IRS’s current workload. Generally, if you respond promptly and provide all required documentation, your issues can be resolved within a few weeks to a few months. However, more complicated cases, particularly those involving disputes or identity theft, may take longer to resolve.
Will my LT40 notice affect my credit score?
An LT40 notice itself does not directly affect your credit score. However, if you do not address the notice and the IRS takes further collection actions, such as filing a tax lien against your property, this could negatively impact your credit. It is crucial to respond to the notice to prevent escalation and protect your credit standing.
Can I negotiate with the IRS regarding my unpaid taxes?
Yes, you can negotiate with the IRS regarding your unpaid taxes. If you are facing financial hardship, you may qualify for an Offer in Compromise, which allows you to settle your tax debt for less than the full amount owed. Additionally, you can request a payment plan or ask for penalty abatement if you believe there are valid reasons for your inability to pay. Consulting a tax professional can be beneficial in these negotiations.
What happens if I receive another notice after addressing the LT40 notice?
If you receive another notice from the IRS after addressing the LT40 notice, it’s important to read it carefully and understand its content. The follow-up notice may relate to the same issue or indicate a new problem. Contact the IRS promptly to clarify the situation and take any necessary
actions. Keeping detailed records of your previous correspondence and payments can help streamline this process.
actions. Keeping detailed records of your previous correspondence and payments can help streamline this process.
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
- An LT40 notice is sent when the IRS is attempting to collect unpaid taxes or retrieve unfiled tax returns.
- The IRS may contact third parties to gather or verify your contact information.
- File missing tax returns and pay your unpaid balance to avoid further penalties.
- If you can’t pay in full, consider setting up a payment plan or applying for an offer in compromise.
- Ignoring the notice can lead to wage garnishments, property liens, and additional penalties and interest on your unpaid balance.
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