What is the IRS Notice CP71 About? CP71 is an annual notice sent to the taxpayer of the unpaid balance that is due. It is a reminder of the amount that is still owed including any interest and penalties. It is important to not ignore as it will result in added penalties and interests. The IRS will also take action and file for tax lien on property or garnishing your wage or bank account.
IRS Notice CP71 – Annual Balance due Reminder Notice is an annual statement of an unpaid balance due. The IRS sent you this notice to remind you of the amount you owe in tax, penalty and interest.
The main reasons why the IRS sends taxpayers this notice include:
The first thing to do is to read the notice CP71 carefully. The notice will explain how much you owe and how to make payments to the IRS. If you don’t understand how the IRS came about the amount due, get a tax professional to explain it for you or you can ask the IRS directly.
If you agree with the amount that was calculated by the IRS, you will need to pay the amount by the due date indicated in the notice CP71 sent to you. Note that your account is currently in deferred status so payment is not required immediately. If you disagree with the amount of tax that was computed by the IRS, you can contact them using the phone number provided on the notice CP71. The number is usually at the top right corner of the notice. You can tell your tax representative to talk to the IRS on your behalf. Tax experts usually have more experience in dealing with issues like this. After you contact the IRS saying you disagree with the amount they calculated, they will request more information from you so make sure you have all your documents ready when you call.
If you can’t pay the full amount you owe by the date stipulated on the notice, you will have to make payment arrangements with the IRS. You can call the toll-free number on the top right corner of the notice to discuss payment options. This is usually an installment agreement that allows you to make monthly payments until your debt is covered in full. The agreement you get depends on your financial situation at that time. If you are unable to pay your balance due by the tax return due date, you can request a payment plan. You will need to file Form 9465, Installment Agreement Request with your tax return or, if your return has already been filed, you can send Form 9465 on its own. If you owe less than $50,000 and can pay your balance due in full within six years, you will not be required to provide financial information to the IRS. However, if you owe over $25,000, you will be required to set up a direct debit installment agreement to avoid the IRS filing a notice of federal tax lien, which can cause you to be denied a loan or access to credit.
You can also qualify for the “offer in compromise” (OIC) program which enables you to settle your tax debt for less than the full amount owed. The IRS doesn’t just give it away, you have to be eligible. The program isn’t for everyone. For you to qualify for the OIC program you must have filed all required tax returns and you must have made any required estimated payments. If you don’t do so, your OIC application will be rejected along with your application fee.
You will be charged interest on the money you owe the IRS. Interest will continue to accrue on your unpaid balance until you pay it in full. If you cannot pay the full amount you owe, you will also receive a late payment penalty. Make sure you pay on or before the date the IRS gives you. By doing so, there will be no additional penalties and interest on your debt.
You need to review the information to verify that the information is correct. If there are any errors you must reach out to the IRS and see what can be done. You must make the payment before the due date that was provided in the contact notice by the IRS. If you are not able to make the full payment amount, fill out the contact form to have one of our tax representatives get in contact with you.
Tax-deferred status refers to investment earnings such as interest, dividends, or capital gains that accumulate tax-free until the investor takes constructive receipt of the profits. Some common examples of tax-deferred investments include individual retirement accounts (IRAs) and deferred annuities.
An investor benefits from the tax-free growth of earnings with tax-deferred investments. For investments held until retirement, the tax savings are substantial. At retirement, the retiree will likely be in a lower tax bracket and no longer subject to premature tax and product withdrawal penalties. Investing in qualified products, such as IRAs, allows participants to claim some or all of their contributions as a deduction on their tax return. The benefit of declaring deductions in current years and incurring lower taxation in later years makes tax-deferred investments attractive.A tax-deferred account is a type of financial account where you pay taxes on withdrawals at some point in the future instead of the year you earn the money. Delaying your income taxes to the future is beneficial in several ways. The government gives us a handful of useful accounts to take advantage. Follow along to learn more about how tax-deferred accounts work, where you can find them, and what to look out for when using tax-deferred accounts.
With a tax-deferred account, you don’t pay income tax the year you earn the funds. Instead, you pay tax on withdrawals in the future. This is a big advantage because you can save and grow your investments tax-free.
This gives you a bigger savings rate and encourages saving more, both good things! Considering inflation and the shrinking value of the dollar over time, when you pay your taxes in the future, you’ll end up with dollars that are worth less than today’s dollars. That is another benefit to you in taking advantage of tax-deferred accounts.
Tax-deferred accounts may also help you save on total taxes over time. If you were to pay tax at your regular income tax rate today, you will probably pay a higher tax rate than you would in the future. During retirement, you will likely have a lower income and lower tax rate than you do today.
When you add up those three main benefits — a lower future tax rate, inflation and having more to invest with today — a tax-deferred account is a powerful way for you to save on tax and grow your wealth.
NOTICE DEADLINE –The date will be given on the notice CP71.
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