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4 min read Tax Guides

CP14 Notice: You Owe Unpaid Taxes

 

Content provided for general information. Talk to your advisor to learn about recent updates or other rules that may apply to your situation.

A CP14 notice is a tax bill from the IRS when you owe unpaid taxes.

One of the most common situations is if you filed a return with taxes owed but didn’t make a payment at the same time. You may also receive a CP14 notice after the IRS previously notified you it made changes to your return.

Why does the IRS send a CP14 Notice?

  • CP14 Notice: A standard CP14 Notice does not mean that the IRS is changing your return or auditing you. The purpose is to explain how much you owe based on information you previously provided. This could be something as simple as filing your tax return online and waiting to mail a check until later.
  • CP14H Notice: You didn’t buy health insurance when the IRS believes you were required to. You owe the shared responsibility payment.
  • CP14I Notice: There are penalties if you don’t take required minimum distributions from certain tax-advantaged retirement accounts. There are also penalties if you contribute too much.

What does CP14 stand for?

CP14 doesn’t stand for anything in particular. It’s just a numbering system the IRS assigns to its notices.

CP stands for computer paragraph and is used for most IRS notices. They mostly number in order, so this just happened to be around the 14th notice the IRS added when they created the current system.

CP14 Notice Explained: General Tax Debt

This is a general, catch-all notice when you owe taxes for a variety of reasons. See the notice or previous notices for details. How to respond will vary based on why you owe the IRS money.

What is minimum essential healthcare coverage?

Minimum essential healthcare coverage is a policy that meets the requirements of the Affordable Care Act. This may be a policy purchased through the exchange (Obamacare) or privately purchased coverage.

What if I had healthcare coverage?

If you had healthcare coverage for the entire year, verify that your policy met the definition of minimum essential coverage. If it did, you will need to resend the IRS proof of coverage.

What if I disagree with the amount of the penalty?

The shared responsibility payment is set based on your income, filing status, and number of dependents. If you disagree with the amount of the penalty for a reason other than that you had coverage, there may be an error somewhere else on your tax return.

What happens if I don’t pay the shared responsibility payment?

Unlike other tax debts, the law specifically forbids the IRS from using liens, levies, and most other collection tactics to collect an unpaid shared responsibility payment. However, the IRS will apply your future refunds towards the debt and interest and failing-to-pay penalties will apply until you pay it in full.

What are required minimum distributions?

Once you reach age 70.5, you must begin withdrawing money from tax-deferred accounts such as traditional IRAs or 401(k)s. The minimum amount is based on your life expectancy and account balance. The purpose for this law is for you to withdraw the money and pay taxes while you are still alive rather than using tax-deferred accounts to pass money to future generations.

This refers to the maximum contribution per year to an account type such as $5,500 for an IRA or 20% of compensation into a SEP IRA. Most brokers will alert you if you are at the contribution limit, but it may be possible to contribute too much if you have multiple accounts at different brokers.

One common situation where a CP14I notice is incorrect is when you rolled over an account and that transaction was improperly reported as a new contribution rather than a rollover.

What if I already paid or started working with the IRS?

If you already made a payment or are working with the IRS to address the balance due, you can disregard the CP14 notice. It can take weeks for the IRS computers to get in sync plus the time it takes to mail things, so a CP14 notice can be out of date.

It may still be a good idea to call the IRS to double check your account status is what you think it is. Keep in mind interest accrues until you pay your account in full.

In addition, there’s no pause on interest and penalties if you’re disputing changes to your return. If you’re successful, this likely won’t matter because the IRS will remove wrongly applied interest and penalties. However, if you’re unsuccessful, waiting longer to pay could add interest and penalties.

What if I disagree with the amount owed?

In almost all situations, the amount on a CP14 should match what the IRS thinks you owe. This would be either based on your original return or based on previous IRS adjustments.

If the IRS made adjustments, you would disagree with that notice rather than the CP14. If you failed to respond to a previous notice in time to disagree, you may still be able to file an amended return.

If you already paid, the first thing you should do is contact the IRS to see if they received the payment after they sent the notice. You will need to provide proof of payment if the IRS has no record of your payment.

If you still disagree with what the IRS says you owe or aren’t sure, you may want to consult with a tax attorney or Enrolled Agent. In addition to challenging the amount you owe, you may also be able to apply for a penalty abatement.

How do I pay an IRS CP14 notice?

You have several options to pay the amount due.

  • Pay online by bank account transfer, debit card, or credit card via the IRS website.
  • Installment agreement (payment plan) directly with the IRS to pay over time.
  • Offer in compromise to settle your taxes for less than the full amount when it would be impossible for you to pay in full now or in the future.
  • Currently not collectible if your current financial status leaves you unable to pay now but you may be able to pay in the future.

If you haven’t had other recent tax problems, you should also check to see if you qualify for a first-time penalty abatement. The IRS may waive or reduce penalties once you make arrangements to take care of your unpaid balance.

What if I don’t pay?

If you don’t pay the balance owed by the due date on your IRS notice, interest and penalties may continue to accrue. The IRS may file a federal tax lien, garnish your wages, or seize your bank accounts or other property.

The most important thing to know is that the IRS is much more understanding and willing to work with you if you’re making efforts to pay rather than ignoring them. With several payment options available, doing something is almost always better than doing nothing.