Receiving a notice from the IRS can be unsettling, and if you’ve received IRS Notice CP71C, it’s important to understand what it means and how to respond appropriately. This notice is a reminder from the IRS regarding an outstanding tax debt and offers information about what actions you can take to address the issue. Here’s what you need to know about Notice CP71C and the steps you should take if it arrives in your mailbox.
What is IRS Notice CP71C?
IRS Notice CP71C is an annual statement sent to taxpayers who owe federal tax. It’s not a bill but a reminder notice, typically sent out once a year, outlining the unpaid balance, including interest and penalties accrued on the account. The notice is a way for the IRS to keep you informed about the status of your debt and to remind you of the various options available for resolving it.
Why Did You Receive This Notice?
You received IRS Notice CP71C because the IRS has records indicating that you have an outstanding tax debt that has not been fully resolved. The notice serves several purposes:
Annual Reminder: To remind you of the existing tax debt and its current amount.
Detailing Penalties and Interest: To inform you of any penalties and interest that have accumulated on the unpaid balance.
Informing You of Payment Options: To make you aware of possible options for paying off the debt or setting up a payment plan.
Understanding the Contents of the Notice
Notice CP71C contains essential information about your tax debt. Here’s what you’ll typically find on the notice.
Amount Owed: The total balance due, including the original tax owed, plus any penalties and interest.
Payment Instructions: Details on how to make a payment to the IRS.
Possible Consequences: Information on what may happen if the debt remains unpaid, such as additional penalties, interest, or potential collection actions like wage garnishment or levies.
Contact Information: A phone number and contact details if you need to speak with an IRS representative for further clarification or assistance.
Steps to Take If You Receive IRS Notice CP71C
Receiving any IRS notice can be intimidating. However, it’s crucial to remember what actions need to be taken to fully understand your tax situation.
Review the Notice Carefully
Read through the notice thoroughly to understand the amount owed and the breakdown of any penalties and interest. Compare the information on the notice with your own tax records to ensure its accuracy.
Verify the Debt
Ensure that the tax debt mentioned on the notice is correct. If you believe there is an error or you have already paid the debt, you may need to gather supporting documentation and contact the IRS for clarification.
Consider Payment Options
The notice will outline different payment options available to you, such as paying the full amount, setting up a monthly payment plan, or exploring other options like an Offer in Compromise. Choose the option that best fits your financial situation:
Full Payment: If possible, paying the full amount will stop further penalties and interest from accruing.
Installment Agreement: If you cannot pay the full amount, setting up a payment plan with the IRS can allow you to pay off the debt over time.
If you need to discuss your options, dispute the debt, or set up a payment plan, contact the IRS using the phone number provided on the notice. It’s essential to reach out to the IRS promptly to avoid further penalties or enforcement actions.
Seek Professional Assistance
If you’re uncertain about how to handle the notice or if the amount owed is substantial, consider seeking help from a tax professional. They can provide guidance tailored to your situation and help you navigate the process.
Keep Records
Keep a copy of the notice and any correspondence or payment confirmations related to your tax debt. Proper documentation is essential in case there are any disputes or issues in the future.
Ignoring IRS Notice CP71C Can Lead to Serious Consequences
Ignoring this IRS notice won’t make the debt go away. If the tax debt remains unpaid, the IRS can take more aggressive actions to collect the amount owed. These actions can include placing a lien on your property, garnishing your wages, or levying your bank account. Addressing the notice promptly can help you avoid these potential consequences.
Tax Help for Those Who Received IRS Notice CP71C
Receiving IRS Notice CP71C is a reminder of an existing tax debt, not an immediate threat. However, it does indicate that the IRS expects you to take action to resolve the outstanding balance. By reviewing the notice carefully, verifying the debt, exploring payment options, and possibly seeking professional help, you can take the necessary steps to address the situation and avoid further complications. If you need help understanding or addressing your IRS notice, we can help. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities.
We often hear that the tax professionals qualified to represent you before the IRS are CPAs, tax attorneys, and enrolled agents. While the first two roles are more well-known, many are still confused about what exactly an enrolled agent is. An Enrolled Agent (EA) is a federally authorized tax practitioner who has technical expertise in the field of taxation. Enrolled agents are empowered by the U.S. Department of the Treasury to represent taxpayers before the IRS for audits, collections, and appeals. They are the only taxpayer representatives who receive their right to practice from the federal government. Here is an overview of enrolled agents, including what it takes to become one, how they differ from CPAs and tax attorneys, and the advantages of hiring one for help with the IRS.
The Role and Responsibilities of an Enrolled Agent
Enrolled agents are equipped to handle a wide range of tax matters. Some of their key responsibilities include the following.
Tax Preparation
EAs are tax experts who assist individuals, businesses, and other entities with preparing and filing their tax returns. They can navigate complex tax situations and ensure compliance with tax laws.
Tax Planning
EAs help clients make strategic decisions to minimize their tax liability. This may involve advising on investment strategies, retirement planning, or business decisions that have tax implications.
Representation
One of the primary roles of an enrolled agent is to represent taxpayers before the IRS. EAs can advocate on behalf of their clients during audits, appeals, and collections. They can also negotiate with the IRS to resolve issues such as back taxes or penalties.
Compliance
EAs help clients understand their tax obligations and ensure they comply with federal and state tax laws. This includes advising on record-keeping, reporting requirements, and other tax-related matters.
How Does One Become an Enrolled Agent?
Clearly, enrolled agents carry a lot of responsibility and authority. That said, it’s important to note that there are two primary paths to becoming an enrolled agent.
Pass the Special Enrollment Examination (SEE): This is a comprehensive three-part exam that covers individual and business tax laws, IRS practices and procedures, and various representation issues. The SEE is designed to test a candidate’s knowledge of the Internal Revenue Code and its application to various tax scenarios.
IRS Experience: Individuals who have worked for the IRS for at least five years in a position that regularly required the interpretation and application of the tax code can also become enrolled agents. Their IRS experience serves as evidence of their knowledge and expertise in the field.
After becoming an EA, individuals must complete continuing education courses to maintain their status. This requirement ensures that EAs stay up-to-date with the ever-changing tax laws and regulations.
How Do Enrolled Agents Differ from CPAs and Tax Attorneys?
While enrolled agents, Certified Public Accountants (CPAs), and tax attorneys can all represent taxpayers before the IRS, there are key differences in their training and areas of expertise. Enrolled agents specialize in taxation and have a deep understanding of the tax code. Their primary focus is on tax preparation, planning, and representation. CPAs are accountants who have passed a state licensing examination. They offer a broader range of services, including auditing, accounting, and financial planning, in addition to tax services. Not all CPAs specialize in taxation, but those who do often provide similar services to EAs. Tax attorneys are lawyers who specialize in tax law. They are well-versed in legal issues related to taxes, such as tax disputes, litigation, and estate planning. Tax attorneys are often sought for complex legal matters and can represent clients in tax court.
The Advantages of Hiring an Enrolled Agent
There are several benefits to working with an enrolled agent.
Tax Expertise: EAs have comprehensive knowledge of tax laws and are required to stay current with the latest changes, making them well-equipped to handle complex tax issues.
IRS Representation: EAs have the authority to represent taxpayers before the IRS, providing a layer of protection and advocacy during audits and disputes.
Nationwide Practice Rights: Unlike CPAs and attorneys who may be limited to practice in specific states, EAs are federally authorized and can practice in any state, providing flexibility for clients with multi-state or national tax concerns.
Tax Help for Those Dealing with the IRS
Enrolled agents are highly qualified tax professionals who specialize in taxation and have the unique authority to represent taxpayers before the IRS. Whether you need assistance with tax preparation, planning, or navigating an audit, an EA can provide expert guidance and representation tailored to your specific needs. Optima Tax Relief has a team of knowledgeable tax professionals, including enrolled agents and tax attorneys, with experience helping taxpayers with tough tax situations.
When it comes to transferring wealth, the gift tax exclusion is a valuable tool for individuals looking to pass on assets without incurring significant tax liabilities. The gift tax is a federal tax on the transfer of money or property from one person to another without receiving something of equal value in return. However, the IRS provides an annual gift tax exclusion that allows taxpayers to give away a certain amount each year tax-free. Here’s a closer look at how this exclusion works and how you can use it to your advantage.
What Is the Gift Tax Exclusion?
The gift tax exclusion allows individuals to give gifts up to a certain amount each year without triggering the gift tax. For the tax year 2024, this annual exclusion amount is $18,000 per recipient. This means you can give up to $18,000 to as many people as you like within the year. Those gifts won’t be subject to the federal gift tax. Note that the person who makes the gift, known as the donor, is generally responsible for paying the gift tax.
How Does the Gift Tax Exclusion Work?
Each year, you can give a specific amount to any number of individuals without the gifts counting against your lifetime gift tax exemption. Here’s how it breaks down:
Annual Limit Per Recipient: The exclusion applies on a per-recipient basis. For example, if you have three children, you can give each of them $18,000 in 2024 without owing gift tax. That means you could potentially gift $54,000 ($18,000 x 3) in one year without incurring any tax liability.
Unlimited Gifts: You can give gifts to as many individuals as you wish. The exclusion applies separately to each recipient. This means you can give $18,000 to one person or 100 people in 2024 without paying gift taxes
Joint Gifts for Married Couples: Married couples can combine their exclusions. If you’re married, you and your spouse can each gift $18,000 to the same person. This effectively doubles the exclusion to $36,000.
Lifetime Gift Tax Exemption
In addition to the annual exclusion, there’s a lifetime gift tax exemption. This is tied to the federal estate tax exemption. This is the total amount you can give away over your lifetime without having to pay federal gift taxes. For 2024, this lifetime exemption amount is $13.61 million per individual. If your gifts exceed the annual exclusion amount, the excess is deducted from your lifetime exemption. However, this only comes into play when you exceed the annual limit. Note that in 2026, the lifetime exemption amount will return back to pre–Tax Cuts and Jobs Act levels. This could mean an estimated $7 million in lifetime gift exclusion.
Gift Tax Examples
Here’s an example of how the gift tax works. If you gift $30,000 to a friend in 2024, you’ve exceeded the $18,000 exclusion by $12,000. That $12,000 would count against your lifetime exemption of $13.61 million. After this gift, your remaining exemption would be $13.61 million – $12,000 = $13,598,000. You would not owe gift tax until your cumulative gifts exceed this lifetime amount. However, you must file IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, to report this gift.
Let’s look at another example that involved exceeding the lifetime exemption. Let’s say you have already used up your $13.61 million lifetime exemption by giving large gifts over the years. In 2024, you give $1 million to your grandchild. The first $18,000 of this gift is covered by the annual exclusion. However, the excess amount of $982,000 ($1 million – $18,000) is now subject to gift tax, which has a marginal tax rate. In other words, the larger the gift, the more tax you’ll pay.
What Gifts Are Excluded?
Not all gifts count toward the annual exclusion. Certain types of payments are not considered taxable gifts, including:
Direct Payments for Medical or Educational Expenses: If you make a direct payment to a medical provider for someone else’s medical bills or pay tuition directly to an educational institution, these payments do not count toward your annual gift exclusion.
Gifts to Spouses: Gifts to your spouse are generally not subject to gift tax if your spouse is a U.S. citizen.
Charitable Gifts: Gifts made to qualifying charities are typically not subject to gift tax.
Filing a Gift Tax Return
If you give a gift exceeding the annual exclusion amount to any recipient, you’ll need to file IRS Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return. This form tracks gifts made during your lifetime and any amounts that count against your lifetime exemption. However, filing this form doesn’t necessarily mean you owe gift tax; it’s simply a way for the IRS to keep track of the gifts you make.
Why Use the Gift Tax Exclusion?
The gift tax exclusion can be a powerful estate planning tool. By making use of the annual exclusion, you can reduce the size of your taxable estate, potentially lowering future estate taxes. It also allows you to pass on assets to your loved ones during your lifetime in a tax-efficient manner. If ever unsure how to proceed with gifts, you should consult a knowledgeable tax professional. Optima Tax Relief has over a decade of experience helping taxpayers with tough tax situations.
When dealing with unpaid taxes, one of the most significant and immediate consequences can be an IRS bank levy. This action allows the IRS to legally seize funds directly from your bank account to satisfy outstanding tax debts. Understanding how an IRS bank levy works, how it can be avoided, and the steps to take if you’re facing one is crucial for anyone in financial trouble with the IRS.
How Does an IRS Bank Levy Work?
An IRS bank levy is a legal mechanism the IRS uses to collect unpaid taxes. Unlike a wage garnishment, which takes money from your paycheck over time, a bank levy can seize the full balance in your account up to the amount of tax owed.
IRS Bank Levy Process
IRS Notice: Before placing a bank levy, the IRS must send you a series of notices. The most critical is the Final Notice of Intent to Levy and Notice of Your Right to a Hearing (also known as Letter 1058 or LT11). This notice gives you 30 days to either pay your debt or arrange an alternative.
Bank Hold Period: Once the levy is issued, your bank will place a hold on the levied amount in your account for 21 days. This hold gives you time to resolve the issue before the funds are transferred to the IRS.
Seizure of Funds: If the debt isn’t settled within those 21 days, the bank will release the funds to the IRS. The levy continues until the full amount owed is collected or the levy is lifted.
What Types of Accounts Can Be Levied?
The IRS can levy funds from several types of financial accounts, including:
Checking accounts
Savings accounts
Money market accounts
Investment accounts (with special rules)
However, the levy only applies to funds available at the time the bank processes the levy. Future deposits are not immediately subject to the same levy unless the IRS issues a new one.
Steps to Take If You’re Facing a Bank Levy
If you’ve received a Final Notice of Intent to Levy, don’t ignore it. Acting quickly can help prevent the levy or minimize its effects. Remember, you have the right to request a Collection Due Process hearing within 30 days of receiving the final notice. This can temporarily stop the levy while the IRS reviews your case. Apart from this, the most straightforward way to avoid a levy is to pay the amount owed in full. If you can’t pay the entire debt, consider other options like an Installment Agreement or Offer in Compromise. If a levy would cause you significant financial hardship, you can request that the IRS release the levy. You’ll need to show that the levy prevents you from meeting basic living expenses. Navigating an IRS bank levy can be complex. A tax professional can help you negotiate with the IRS, request a hearing, or explore settlement options.
How to Avoid a Bank Levy in the Future
To avoid facing an IRS bank levy, it’s important to stay on top of your tax obligations and address issues promptly. Here are some tips:
File on Time: Even if you can’t pay your taxes, file your return on time. The IRS is more likely to work with you if you file, even if you owe.
Communicate with the IRS: If you receive notices about unpaid taxes, respond promptly. You may be able to set up a payment plan or find other solutions before enforcement actions like a bank levy are taken.
Stay Current: If you’re already on an installment plan or settlement agreement, make sure you stay current with your payments. Falling behind on these arrangements can trigger a levy.
Tax Help for Those Being Levied by the IRS
An IRS bank levy can be a serious financial disruption, but it’s not inevitable if you act early. Understanding the process and knowing your options can help you prevent or address a levy before it causes long-term damage. If you’re facing a levy, consider seeking professional assistance to navigate the process and explore potential relief options. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
The national tax firm was recognized for outstanding customer service, transparency, and industry leadership
Optima Tax Relief is proud to announce that it has been named to the 2024 Forbes Advisor ‘Best Of’ list for Tax Relief Services. This prestigious recognition highlights Optima’s unwavering commitment to providing exceptional tax relief services to individuals and businesses facing IRS challenges.
Forbes Advisor’s selection process for this accolade was thorough and rigorous. The methodology included an analysis of 11 high-profile tax relief companies. Forbes narrowed the list down to three top contenders by evaluating several key factors:
Product and Process: The effectiveness and efficiency of each company’s tax relief offerings.
Transparency: The clarity and honesty with which companies communicate with their customers.
Customer Service Satisfaction: Evaluated through third-party tools, this factor measured how well each company serves its clients.
Customer Service Tools: The availability and quality of resources provided to customers for support.
Longevity: How long each company has been in business, reflecting stability and experience.
Optima Tax Relief emerged as one of the top three tax relief companies, and the #1 pick for back taxes relief, distinguishing itself in each of these critical areas. Optima’s outstanding TrustPilot rating, with over 3,400 glowing reviews, was a defining element in Forbes’ decision-making process.
“We are honored to be recognized by Forbes Advisor as one of the best in the industry,” said David King, CEO of Optima Tax Relief. “This award is further proof of the dedication and hard work of our team, who strive every day to provide the highest level of service to our clients. It is especially gratifying to know that our positive client reviews played a significant role in Forbes’ decision—it truly stands as the pinnacle of our efforts. Our mission has always been to help people take control of their tax situations, and this recognition reinforces our commitment to that goal.”
As Optima Tax Relief continues to lead the industry in customer satisfaction and service excellence, this recognition by Forbes Advisor further solidifies its reputation as a trusted partner in navigating complex tax issues.
