This guide walks you through what a CP14 is, who gets it, how to pay it, and when deeper issues (like liens or levies) might come into play.

What Is an IRS CP14 Notice?

A CP14 is the IRS’s first official notice that you owe tax for a specific year. It’s not a penalty by itself, it’s the IRS saying: “We processed your return, and it shows a balance due.” The CP14 lays out:

• The amount you owe
• Any interest or penalties that have accrued
• Your payment due date
• Instructions for how to pay

It’s the IRS’s polite nudge before they escalate the situation.

Who Receives a CP14?

You may get a CP14 if:

• You filed a return but didn’t pay the full amount owed
• You underpaid based on withholding or estimated taxes
• You filed late and owe resulting penalties
• The IRS adjusted your return and found you owe more

Even people who believe they are fully paid up sometimes receive CP14 notices due to:

• IRS processing delays
• Mismatched W-2 or 1099 information
• Math corrections
• Missing payments the IRS hasn’t credited yet

The most important thing? Don’t ignore it.

Do You Actually Owe the Amount on the CP14?

Not always. Before paying, check:

• Is the tax year correct?
• Does the amount align with your return?
• Did you already make a payment that isn’t showing yet?
• Did the IRS make an adjustment you disagree with?

If anything looks off, you or your tax professional can call the IRS or send a written response. Sometimes a simple payment misapplied to the wrong year causes the entire issue.

How to Pay a CP14 Balance

If the amount is correct, the fastest ways to pay are:

1. IRS Online Account
   You can pay directly from a bank account via your IRS Online Account.
2. Direct Pay
   A simple one-time payment option straight from your checking or savings account.
3. Debit or Credit Card
   Accepted, but fees apply.
4. Installment Agreement
   If you can’t afford to pay it all at once, you can request:
   • A short-term payment plan (up to 180 days)
   • A long-term installment plan (monthly payments)
   • These can be set up online if the amount is below certain thresholds.
5. Mail a Check
   Old-school, but acceptable, just be sure to include:
   • Your name
   • Tax year
   • Last four digits of your SSN
   • Notice number (CP14)

Never send cash.

Do You Need a Tax Levy to Pay the CP14?

No, the CP14 itself does not mean a levy is happening. A levy is when the IRS takes money from your bank account or wages, and it’s a last resort, not a first step. The escalation path typically looks like:

1. CP14 – first notice that you owe
2. Additional reminder notices
3. CP504 – “Notice of Intent to Levy” (a warning)
4. Letter 1058 / LT11 – final notice with levy rights
5. Actual levy if no payment or arrangement is made

You can prevent levies entirely by:

• Paying the CP14 balance, or
• Setting up a payment plan

As long as you communicate with the IRS or have a tax professional represent you, levies are avoidable in most cases.

What If You Cannot Pay?

If the balance is too high, you still have options:

• Installment agreements
• Currently Not Collectible status (if you have financial hardship)
• Penalty abatement (sometimes available if it’s your first issue)
• Offer in Compromise (rare but possible if you qualify)

A tax professional can evaluate which option fits your situation.

Should You Hire a Tax Professional for a CP14?

You may want help if:

• The balance seems wrong
• You received multiple notices
• You’re worried about IRS enforcement
• You have unfiled returns
• You’re dealing with large amounts or repeat CP14s

A CPA or enrolled agent can review transcripts, correct errors, negotiate payment plans, and make sure you’re protected.

Ultimately, A CP14 is not an audit, a lien, or a levy, it’s simply the IRS letting you know you owe a balance. The key is to take action early, verify the amount, and handle payments or disputes before it escalates.

With the right guidance, a CP14 can be resolved cleanly (and often quickly), leaving you with peace of mind and a clear path forward.

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Your reaction may vary from curiosity to fright. Regardless, you’re going to have to read the letter and likely respond in some capacity — i.e. notices from the IRS won’t go away and if it is bad news, it’s better to approach it head-on rather than let it fester, especially if it’s bad news because the cost will only get worse.

One possible outcome is it’s there to inform you that there’s a delay in processing your return. In that case, the IRS will notify you with an estimated timeline for when you can expect your refund. Of course, if you’re sitting there saying, “why would they send a letter telling me I’ll get another letter later?” It’s because radio silence leads to panic, leads to calls to the IRS, leads to tied up lines, leads to myriad crises with other people whose situation may not be as copacetic.

Of course, another reason the IRS might be reaching out is that you may have a balance due. Your response to this is likely to be different depending on your tax situation. For instance, if you filed your taxes assuming you’d be receiving a refund, then you’re in for a rude awakening and potentially a stern conversation with your existing CPA (assuming you have one).

One of the reasons the IRS may reach out is that they need more information from you. This may not be urgent or something that’s going to negatively (or positively) impact you. It could simply be that to process your taxes, they need additional documentation or another form to backup a claim.

Similarly, they may be requesting verification of your identity. In most cases, you are advised to read any IRS mail with care as it may contain pertinent information and instructions. Moreover, the IRS will only reach out via mail, not email, not phone or text. If they’re reaching out asking for you to verify your identity then a concern may be identity theft. The IRS may be monitoring your account to check for misinformation or fraudulent action. It’s also possible you may have received suspicious correspondence that is revealed to be a phishing scam. On the IRS website, you can find more information concerning scams and you can report phishing from the site. You can contact the IRS by phone, but be advised it’s likely to take myriad attempts. Most of the time, the IRS will not leave you on hold, but will have a robot respond to tell you there’s “high call volume” and “please call back later”. If this happens, you’ll need to keep trying — best to do so early in the morning and on pretty much any day but Monday (which is usually the busiest).

Of course, if you’re worried or don’t necessarily understand the IRS jargon, then you can appoint the power of attorney privilege to your accountant to ensure they can act and speak on your behalf. It’s worth noting that while the IRS has fairly good records, they can get things wrong, and in that scenario, you need someone to advocate for you.

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There is nothing worse than finding out you owe more taxes and worse, that you now owe interest on those unpaid taxes. It rapidly turns an innocuous chore into a panic attack. If you owe taxes, your best move is to contact a CPA (especially if you already have one) to figure out it’s authenticity and if so, what to do next.

In some cases, the IRS has the information wrong. We’ve seen this happen when people own a percentage of equity in a company (but it gets misrepresented as a higher percentage or total ownership), expats often struggle with this (paying taxes in more than one country), or when someone owns multiple income properties but does not technically work (a traditional job). And in some cases, it’s simply a clerical error. Whatever the reason, if you believe this is in error, it’s best to file a dispute and provide supporting documentation.

If however, the IRS denies your motion or fails to examine the evidence you put forth, then the appropriate action is to file Form 656-L Offer in Compromise, i.e. Doubt as to Liability.

If you have reasonable doubt (and especially if you can prove it) to the IRS claim that you owe tax debt, then here are a handful of things you should know before you file.

First, this was already mentioned above, but it bears repeating, you do not need to fill out this form until your initial dismissal has been revoked. In some of the examples above (such as a clerical error), it’s an honest (albeit mortifying) mistake that’s remedied. If however, your claim isn’t accepted, then you should file Doubt as to Liability.

The next most important factor will be evidence. If you can confirm with paperwork, bank statements, W2s, etc. that you do not owe the amount they claim, then you should file Form 656-L along with all supporting documents (make sure you keep copies).

Occasionally, through the process you’ll find you do owe taxes but not necessarily the amount they claim you owe, in that case, you should also file this form. This isn’t an all-or-nothing scenario. If you recognize you do owe more taxes, but not the full amount the IRS claims, you can still argue the doubt as to liability.

The form should be submitted with a written statement accompanying it and any supporting documents you can provide.

At this point, it’s worth noting that you can’t argue doubt as to liability if the tax debt owed is court ordered — in other words, if you take your case to tax court and lose, there is no room for negotiation or dismissal.

When is Doubt as to Liability Applicable?

An important aspect of this form is that you can only apply when the agreed upon time for disputing the tax assessment has ended. Again, when there was simply a mistake when interpreting a tax law, that could change the tax assessment, or if the examiner made a clerical error.

However, if the assessor does not consider the presented evidence, then Doubt as to Liability is applicable.

It may also be applicable in case there was a false data regarding the wages you made. It can also happen when an inaccurate recording of the stock’s value led to the taxpayer’s liability. Any false information will need to be documented with supporting evidence before filing a refund claim. If the refund claim is denied, you may file Form 656-L, Doubt as to Liability.

Another circumstance this action can apply, is if the taxpayer allegedly owes more, but the taxpayer is not available due to some circumstances (again, expatriates often face this issue). If all the audited items are disallowed and cause a tax debt, then this form is applicable as well.

To avoid penalties, gather the appropriate evidence, and follow the best course of action for an Offer in Compromise, you should use a CPA. They’ve been through this process, have studied it and can provide confident guidance in the actions you take.

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Fitting that one of our founding fathers said it. It’s so American, it may as well be etched into the Bill of Rights. Jokes aside, not a tax season goes by where someone doesn’t utter this phrase — frankly, the seasonality of tax season isn’t even a factor anymore, but I digress.

Few people enjoy taxes, least of all business owners. Whether you’re trying to make a profit or increase your margins for potential investors, taxes can a sore spot. While Washington is one of the more lenient states to run a business, there’s always a chance you’ll end up owing a significant amount of taxes. While a long term strategy is restructuring your business (i.e. S Corp), another thing you can do is offer an Offer in Compromise. An offer in compromise is a tax settlement statement that settles the taxes owed for less than the original amount. To do this, you need none other than form 433-B. Several sections must be completed in the form.

Section 1: This section of the form is pretty basic. You simply enter the exact contact information for your business, when it was founded, the layout, employee count, and gross monthly payout.

Note, include in your gross payout any financial information regarding online sales and credit cards allowed for purchases in your company.

Section 2: This section includes a list of the specific individuals that serve to help grow your company, as far as partners, shareholders, investors, etc. You need to include their contact information as well as their ownership or interest percentage.

Section 3: This section is to share the other financial information about the company. Typically this means including your payroll contact (if you outsource) and reporting agent, lawsuits related to the business, bankruptcy, debt currently owed, and asset information. There are a few other inquiries, but you get the idea.

Section 4: This section covers your business’ assets and liabilities, such as cash on hand, business bank accounts, total funds, available credit and more. This is a crucial section that should be carefully examined and filled out to the best of your knowledge, i.e. you want to be as thorough as possible when making a pitch to the IRS about lowering your taxes owed.

Section 5: This section is reserved for your monthly income and expenses during the filing period for your tax payment plan, a temporary delay, or offer.

In addition to the form, you’re expected to attach additional requirements and submit those to the IRS; you should do this three months before the date of filing the form. The attachments should include all bank statements and investment account statements, lender statement regarding assets, with monthly payments and balance as well as UCC financial statements and depreciation schedules, statements of recurring expenses, credit card statements and more.

Normally, if you’re unable to pay the taxes owed, the IRS will ask you to fill out the Form 433-B. There are a few options they’ll come back with for you to repay the funds owed. Usually, this boils down to installments, offering to accept payment after a temporary delay, or the offer in compromise (OIC). Once you have completed the form, the IRS will let you know what their determination is and then you can determine where to go from there.

Now most businesses have to fill out the form, that means LLCs, partnerships, S corporations, etc. If however, you are a sole proprietor then you would be considered self-employed and have to fill out another form, the Form 433-A.

If you like you can request for an installment agreement to break down the total funds owed into equal monthly installment payments. The longest allowable term to pay back the funds is ten years unless the collection statute expiration date (CSED) arrived beforehand. In some cases companies will not be able to pay the full amount and the IRS will accept partial payments instead.

Given that this is an offer to the IRS, having an accountant pull all the required data you need to complete the forms accurately is never a bad option either.

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Until now. And you’ve got the finished results right here in front of you to use your advantage. Not only will you be able to get effective tips, but you’ll also get the answers to the most commonly asked questions by small business owners looking into this area of taxation.

• In certain situations, this route can extend deadline for IRS collections.

Often misconstrued, and potentially hazardous. Many don’t realize that when these types of motions are filed, the Internal Revenue Service looks to make sure you cross your Ts and dot your Is during the whole process. And if you don’t, be prepared to let them benefit from your oversight, by replacing the time lost due to the process that was initiated on your behalf if it gets denied.

Quick Nugget of Info: The IRS has a total of 10 years that they’re able to collect taxes owed.

• Offers in compromise are subject to investigation which could take several months.

Based upon previous experiences shared by those who went through the process, it can be timely. Expect an investigation to take 6-9 months, if not longer, to reach its conclusion. The IRS is going to do everything they have to do to ensure your outcome is the one that was fair as well as logical. So make sure you keep this in mind when doing any planning or anticipating any results from your efforts.

• Be prepared if you win your battle with your proposed offer.

You will have 2 years to pay your agreed-upon amount that was outlined in the response to your filing most recently submitted. The time starts counting down the day of acceptance. Time is of the essence, so don’t let yourself take unnecessary chances.

• Wrapping Up: Answering Frequently Asked Questions About Offers in Compromise

The best way to present the final countdown is to ensure that the most asked questions among business owners today get answered. Once and for all. So, here’s to ending the void of answers that have been awaited by many over the years.

• After how many years can prevent the IRS from acting on unfiled returns?

They have 10 years, just like they do with taxes owed from previously filed tax returns. It’s a tax debt either way that you look at it. Even if it becomes more complex due to them uncovering the years that you forgot to file your return.

• Is there a better term that one should choose over the others?

Consider one that has a 5-year probationary period where you stay current with all filings and tax payments. This will help ensure you have a higher chance of success. Not to mention, eliminate a lot of stress in the long run.

• Can the IRS collect back taxes after 10 years?

No, this is the amount of time they must pursue all applicable avenues of collection. After 10 years, it becomes non-existent in the eyes of the law. If they don’t act on it in time, it becomes their loss and your gain when it comes to the upper advantage,

• How does the 10-year statute of limitations affect liens?

If they don’t take it to court and pursue the necessary action to collect the amount of taxes owed before hitting 10 years, there’s nothing that can be done. The lien will be able to be removed provided you have proper guidance and/or representation.

• What about state tax debt collections, is it the same?

This varies depending on each state due to the variety of tax laws that state agencies are known to put into effect and enforce. Make sure to consult the guidelines for your specific state to get the proper answer to this question since this is meant as a reference for federal taxation.

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The Failure-to-File Penalty

The failure-to-file penalty applies to you if you did not file your tax return by the filing deadline. This penalty is typically more than the penalty which follows from failing to pay your taxes, and for this reason it can turn into an extremely troublesome experience.

Size of the Penalty

Filing your taxes late normally subjects you to a fee of 5 percent of any money owed for each month that you did not file. It begins to accrue in value on the first day that you missed the filing date. The penalty can reach up to a maximum of 25% of the taxes you owe in failing to file.

Late Payment Penalty

This penalty only applies if you failed to pay any taxes owed by the tax deadline, regardless of whether or not you filed on time. This payment penalty is worth 0.5% of any taxes owed for every month that you do not pay. While it’s not as steep as the failure-to-file penalty, and is often waived if both penalties apply for each month you owe, it is still an important thing to be aware of.

To avoid these penalties, you should always file and pay your taxes on time. Don’t wait!

Image credit: Lending Memo

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Why Did it Happen?

The main reason why audits fell to their lowest level in a decade is because of the cuts made to the IRS. They have a smaller workforce; therefore, they are less able to audit people.

Nevertheless, don’t assume that this gives you the chance to defraud the Federal government of a few dollars here and there. Audits haven’t simply decreased in number. They have become more targeted. They have become more inflexible, and the costs of doing something wrong are huge.

Targeting the Wealthy

One big change is the targeting of the wealthy. The IRS has been criticized by both President Barack Obama and the public for unnecessarily concentrating their efforts on the American middle classes. It meant their returns were low and the wealthy were frequently able to pay less tax.

Obama has demanded a change in the way the IRS operates, and this includes targeting the wealthy.

What Does it Mean for You?

You would be wrong for believing the average American taxpayer no longer has to worry about the potential for an IRS audit. This is not the case. The IRS still audits those from all sections of society.

Continue to be vigilant and continue to be accurate when it comes to your taxes. The IRS won’t hesitate to audit you!

Image credit: Lending Memo

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Seattle CPA firm Huddleston Tax CPAs, we can answer your questions and assist you through an IRS audit. Give us a call at (425) 483-6600.

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Regarding their list, kiplinger provides some good examples and some not so good ones. For example, maybe something like getting audited for not reporting your overseas bank account (something the IRS audit branch is pretty concerned with) is not a personal concern for you. Maybe a Swiss account or an account in the Caymans you’re not paying taxes on sounds a bit, dunno, foreign?

That said, those big time audits are quite lucrative for the IRS, and the average tax payer’s removal from them does little to change that. What’s interesting, of course, is just how rampant this kind of tax evasion has become. Accordingly, the IRS has turned to offering voluntary compliance programs with lessened penalties for offenders who choose to come clean about their overseas holdings which usually means no jail time. There was wide-spread speculation during the 2012 presidential election that Mitt Romney took advantage of these clauses.

In any case, take a look at these 5 red-flags (taken from these 5 red flags over at theconsumerist.com) we’ve put together for you that may actually concern you.

1.) You make too much. According to the “kiplinger 14” the average tax payer has about a 1/100 chance of being audited. People reporting incomes over $200,000 have a 1/27 chance or a 4% audit chance. That’s pretty low. However, if you’re fortunate enough to report an income of a $1,000,000 or more, well then your chances rise to 1/8, which means a 9% rise in your chance of being audited.

2.) Your deductions for charity donations are too large. Kiplinger suggests keeping thorough records to avoid an audit on these deductions. After all, the IRS has pretty accurate records of what the average tax payer is giving to deductions and if yours are way off the charts you’re only helping yourself attract attention from IRS algorithms.

3.) Business Deductions. Ye who are self-employed, watch now where ye tread. A past article on our blog elucidated some key considerations regarding travel deductions for the self-employed.  To avoid an audit here it is advisable to keep very detailed records of every expense you are deducting. Otherwise, as kiplinger points out, “your deduction is toast.”

4.) What’s the deal with your home office deduction? Well, as far as the IRS is concerned it “has found great success knocking down the deduction and driving up the amount of tax collected for the government.” So it’s a huge consideration for the IRS, and it’s something we’ve touched on in our blog in the past. You can read the article here. What you need to keep in mind is that despite the IRS’s hyper-attention to these kinds of deductions, you can certainly still use them.–Just be sure that you’re using this deduction the right way.

5.) You own a small business. We’re a small business CPA firm looking out for other small businesses. We have to mention this one. “Experience shows that those who receive primarily cash are less likely to accurately report all of their taxable income,” says kiplinger. As a result, the IRS is relegating an increased focus on getting what is due from small businesses.

Now that you’ve heard from us about auditing, leave a comment or socialize with us through the media, and let us know what you’re thinking. You can also give us a call at (425) 483-6600 and we’ll totally make sure you don’t get audited.

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