Simply put, this means the IRS recognizes a bill on your account, and they want you to pay it. This notice will come with pertinent details, including how much you owe, how to pay, and when it’s due. A collection letter from the IRS is often the most feared type of correspondence with this government agency, although it’s not the end of the world.
In the event that you’re unable to pay your balance in full, the IRS will provide options for you, including details on how to request an extension or enter an installment agreement. It’s important to pay attention to their instructions and respond promptly to prevent any penalties that might arise down the road. You can also avoid incurring a federal tax lien if you meet certain criteria.
The key takeaway with any notice or collection letter from the IRS is to pay attention to the messaging and recommended next steps. Each notice will provide you with information on why you’re receiving it, if you need to reply, and how/where to submit your reply. Again, some information notices do not require a next step, so you can simply review the information and file the notice in your records.
You can read more about understanding your IRS notice here. On top of that, the IRS has published a wealth of resources on how, why, and when it may reach out to you. Here’s a handy list of facts regarding IRS letters and collection notices: Ten Things to Know about IRS Notices and Letters.