If you’ve received LT16 from the IRS, don’t panic. You may have been sent this letter for a few reasons, and once you better understand your tax situation, you can decide how to proceed.
LT16 explains that you owe taxes and that the IRS is adding penalties and interest to your account. It also says to contact the IRS about payments. But generally, this notice is just a reminder to pay, and you have time before the agency starts serious collection actions.
Key Takeaways
- The IRS sends LT16 when you owe them money and have not yet made payment arrangements. It likely comes after other efforts to reach you.
- You may owe money because you did not pay the amount indicated on your tax return, did not file a tax return, or had your return adjusted.
- It’s important to pay in full or set up payment arrangements to avoid further issues.
- If you ignore this notice, the IRS will likely move forward with liens, levies, and wage garnishment.
Why Did the IRS Send Me LT16?
The IRS sends LT16 to remind you that you owe taxes. You may owe taxes because:
- You filed your tax return, but failed to pay the balance due at the same time
- You never filed your tax return, and the IRS filed a Substitute for Return to assess tax against you.
- The IRS made adjustments to your tax return, resulting in a balance due.
- The assessment of penalties and interest on a previously unpaid balance led to an outstanding liability.
Key Things to Do Immediately After Receiving an LT16 Notice
After you receive LT16 from the IRS, taking the right steps can help you prevent aggressive collection actions and pursue a more beneficial payment arrangement. Consider the following:
- Don’t panic. Panicking doesn’t make it any easier to handle this situation, but it’s often the first response when the IRS contacts someone. Luckily, at this point, you still have time to make arrangements—the IRS will send several more notices before moving forward with enforced collections.
- Don’t ignore the notice. While panicking isn’t recommended, you should also avoid the opposite reaction—ignoring the letter. Ignoring the LT16 essentially guarantees that your balance will accrue more penalties, and eventually, down the line, if you don’t pay, you’ll end up having assets levied or wages garnished.
- Read the letter in full. LT16 includes a brief section on why the IRS is trying to contact you, your total amount due, and potential consequences if you ignore the notice. It also breaks down the amount you owe into different tax years, original tax amounts, interest charges, and penalties.
- Compare the notice to your own records. Look at the table included in your LT16, which breaks down how much you owe by tax year. Pull up your own records, including your tax transcripts from your IRS account, any payment records you have, and your own copies of your tax returns. Compare what the IRS claims you owe to your records to look for discrepancies.
- Check the due date. LT16 generally gives you 10 days to respond. Check your letter’s notice date and due date so you can respond in time.
Your Options for Addressing an LT16 Notice
A 10-day turnaround time doesn’t give you much time to respond, so it’s important to read your notice and figure out your next move. If you’re overwhelmed and uncertain of what your next step should be, it’s a good time to reach out to an attorney. Here are some response options.
If the Numbers Are Accurate
If you’ve compared the numbers in your LT16 to your own tax records and the IRS has calculated your debt correctly, the next thing to decide is how you want to handle your tax debt. As you see in your notice, the IRS is already considering enforcement actions. However, they would prefer to secure payment voluntarily, both for their benefit and yours.
You can pay your balance in full if you are able to do so. This limits the amount you spend on interest and penalties. While the IRS prefers that you pay online, you can also pay over the phone or by mail. When you pay online, you get immediate confirmation of your payment. You can avoid fees by paying via a bank account instead of with a credit card.
If you cannot pay in full, you may want to look into setting up an installment agreement. IRS installment agreements spread payments out over 72 months (longer in some cases), but during that time, you must file and pay on time every tax season. Incurring new tax debt may result in defaulting on your agreement, so it’s important to address the root cause of your current tax debt to avoid further issues.
Relief options are available for taxpayers who cannot afford to pay their taxes in full. An offer in compromise lets you settle for less than owed, and it’s a good option for taxpayers whose assets and income don’t allow them to pay their taxes in full. But note that the IRS will look at equity in your assets and available credit to see if you’ve fully exhausted other options available to you.
Currently, not collectible status allows for a temporary pause in collection efforts until your financial situation changes. To get approved, you will need to provide the IRS with detailed financial information.
If You Disagree With the Numbers
Perhaps you’ve looked at your tax records and do not believe that the IRS has the accurate numbers—maybe they missed a payment you made or failed to calculate interest correctly. Either way, you should check the phone number in the upper right corner of your notice.
You can call that number to discuss your options or ask questions about the amount you owe. Depending on the situation, you may be able to appeal the tax due, provide proof of previous payment, or file a tax return for the year in question (if the number due is based on a Substitute for Return).
Consequences of Ignoring LT16 Notices
Ignoring an LT16 notice or failing to take action is the worst way to approach this IRS notice. When the IRS receives no response to their letters, they do not know whether or not a taxpayer plans on paying their debt. They can only assume that their notices are not being received or that they are being ignored.
At best, interest and penalties will continue to accrue for as long as you ignore your tax debt, and even that comes at a high price. The failure-to-pay penalty can get up to 25% of your balance. Interest on tax debt compounds daily, so your debt can increase very quickly.
In addition to that, more aggressive enforcement actions are on the way if you do not communicate with the IRS. You’ll receive increasingly urgent notices in the mail, including a CP504 (titled “Notice of intent to seize your property or rights to property”).
Finally, the IRS will send a Final Intent to Levy Notice, such as LT11 or Letter 1058. These letters come via certified mail, and once 30 days have passed from the date on the notice, the IRS can legally seize your assets, which includes wage garnishment, bank account freezes, and seizure of most other assets you own.
Frequently Asked Questions
What should I do if I receive an LT16 notice?
Read the notice in full, taking note of your payment options and due date. You can then make sure that the amounts listed on your notice are accurate and decide how you want to address your tax debt.
What are the payment options for an LT16 notice?
Your payment options are dependent on your financial situation. Payment in full is the option that the IRS prefers, and it also saves you the most money in terms of interest and penalties. Payment plans are available to most taxpayers. Those who cannot pay in full (or at all) may look into partial payment installment agreements, offers in compromise, or currently not collectible status.
Can I set up a payment plan if I receive an LT16 notice?
Many taxpayers do qualify for payment plans, and by setting up one after an LT16 notice, you may avoid more aggressive collection efforts. While you can apply over the phone or via mail, consider applying online for an instant decision. Note that you can only apply online if you owe less than $50,000.
What happens if I don’t pay the amount due on my LT16 notice?
The IRS will continue to attempt to collect what you owe. Expect to receive more collection notices, and ultimately, a legal notice letting you know of their intent to levy assets. This allows them to seize and sell your assets to pay off your tax debt. They can also garnish your wages.
I think the LT16 notice is wrong. What should I do?
You should contact the IRS quickly to resolve the matter and avoid escalating collection efforts. You can either contact them directly or communicate with them via your tax attorney.
How can Wiggam Law help me with my LT16 notice?
We’ll compare the amount owed to your tax transcript for accuracy, explain your payment and resolution options, and communicate with the IRS on your behalf to work towards a favorable outcome. We will negotiate with the IRS if you need a payment plan or some other form of tax relief.
Is an LT16 notice a serious issue?
Yes. The IRS is aware of your tax debt and your failure to pay. If you do not take action to resolve your tax debt, they will move forward with enforced collection.
Contact Wiggam Law today to find out more about our tax services. We can be reached by calling (404) 233-9800 or through our online consultation form.
Sources:
- https://www.irs.gov/pub/notices/lt16_english.pdf
- https://www.irs.gov/individuals/understanding-your-cp504-notice
- https://www.irs.gov/pub/notices/cp504_english.pdf
- https://www.taxpayeradvocate.irs.gov/notices/lt-16/
- https://www.taxpayeradvocate.irs.gov/notices/letter-16/
- https://www.taxpayeradvocate.irs.gov/get-help/roadmap/?notice=29173
- https://www.irs.gov/individuals/understanding-your-lt16-notice
