The IRS CP71 notice in your mailbox means you have unpaid taxes and exactly 30 days to respond before penalties escalate. This isn’t an audit or lawsuit. It’s your last chance to handle tax debt on your terms.
Ignore it and face wage garnishment, bank levies, and federal tax liens. Respond correctly and you can cut your balance, set up affordable payments, or even prove you don’t owe what they claim. Here’s exactly what to do with your CP71 notice, step by step.
- CP71 Notice = IRS Reminder: It’s not a penalty-it’s a heads-up that you still owe taxes.
- Why You Got It: The IRS believes your tax balance is unpaid.
- What to Do Next: If the notice is correct, explore payment plans. If incorrect, dispute it immediately.
- Help is Available: Tax professionals can assist with disputes and resolutions.
- Avoid Late Fees & Penalties: The longer you wait, the more it may cost you.
- IRS Notices Aren’t Always Bad: They’re just prompts to take action-don’t ignore them.
Understanding the CP71 Notice: Why You Received It & What It Means
Receiving an IRS CP71 Notice can be unsettling. You see the IRS logo on the envelope, and suddenly, thoughts race through your mind: Do I owe more taxes? Did I miss a payment? Am I in trouble?
The CP71 notice is not a penalty or audit-it’s a reminder. The IRS sends this annual notice to taxpayers with outstanding balances, giving them a final nudge to take action before things escalate.
Why Did I Get a CP71 Notice?
- You have unpaid taxes. The IRS believes you still owe a balance from a previous tax year.
- It’s a reminder, not a penalty. The IRS sends this yearly notice to update you on your tax debt.
- Ignoring it leads to consequences. If you don’t act, you risk interest charges, penalties, or even collection actions.
Think of it like a credit card company sending a payment reminder. Except instead of late fees, ignoring it could result in wage garnishments or tax liens.
What Happens If You Ignore a CP71 Notice?
The IRS doesn’t forget. Ignoring a CP71 notice triggers a specific sequence of increasingly aggressive collections. First, penalties and interest compound daily, adding hundreds or thousands to your balance. Within 90-180 days, the IRS moves to active collections.
They’ll take up to 70% of your paycheck through wage garnishment. Your employer has no choice but to comply. They’ll freeze your bank accounts and take whatever’s there, including your rent money. A federal tax lien destroys your credit score and attaches to your house, making it impossible to sell or refinance without paying the IRS first.
Act within 30 days of getting the notice and you control what happens. Wait, and the IRS controls everything.
The IRS Strategy: Why They Send CP71 Notices
The CP71 is the IRS giving you one last chance to handle your debt voluntarily before they force collection. It’s cheaper and easier for them if you pay willingly, so they send this notice first.
You have a 30-day window to set up a payment plan, dispute incorrect amounts, or request hardship relief. After that, the IRS shifts to aggressive collection mode with wage garnishments and bank levies.
Use this notice to your advantage. Act now while you still have options and control over how to resolve the debt.
Next Steps After Receiving a CP71 Notice
You have two paths with a CP71 notice. If the amount is correct, set up a payment plan within 30 days to stop penalties from growing. If it’s wrong, dispute it immediately with proof of payments or missing deductions.
Either way, respond fast. The longer you wait, the fewer options you have and the more it costs.
How to Tell If Your CP71 Notice Is Real (Not a Scam)
Tax scams spike every year, and fake IRS letters flood mailboxes. Here’s how to verify your CP71 notice is legitimate before you respond or send money.
Real CP71 notices always include your partial Social Security number, the specific tax year you owe for, and an exact balance that matches previous IRS correspondence. The notice number “CP71” appears in the top right corner. Check the mailing address too. Real notices come from IRS service centers in Kansas City, Austin, Fresno, or Cincinnati, never from Washington DC.
If you’re still unsure, call the IRS directly at 800-829-1040. Don’t use phone numbers from the notice itself. Scammers create convincing fake letters with their own callback numbers. The IRS can verify any legitimate notice using your SSN and the notice number.
Red Flags of Fake IRS Notices
Watch for these warning signs:
- demands for immediate payment through gift cards or wire transfers,
- threats of immediate arrest,
- notices sent by email (the IRS always uses postal mail first)
- requests for credit card numbers over the phone.
The real IRS gives you time to respond and offers multiple payment methods.
When You Agree with Your Tax Balance Due
The first step is considering payment plans or installment agreements. This option lets taxpayers spread their payments over time, making large amounts more manageable without breaking the bank account.
For details on setting up these arrangements directly through direct debit from your bank account or using a credit card, visit IRS’s Payment Options page. Opting into a payment plan not only sidesteps more severe repercussions and extra fines but also paves the way for smoother financial management in facing tax obligations.
Tax pros often emphasize utilizing tools like tax withholding estimator or consulting them for guidance on future tax breaks to prevent recurrence of such situations. Adjusting withholdings can significantly impact preventing future debts by ensuring enough taxes are paid throughout the year.
When You Disagree with Your Tax Balance Due
If you believe the amount on your CP71 notice is incorrect, don’t ignore it—taking immediate action is key to resolving discrepancies before penalties or collection efforts escalate. The IRS allows taxpayers to dispute balances through a formal process, but you’ll need to contact them promptly and provide supporting documentation.
1. Identify the Error
Common reasons for discrepancies include:
- Missed tax credits or deductions (e.g., Child Tax Credit, Earned Income Credit)
- Processing errors in IRS calculations
- Payments not applied correctly
- Identity Protection PIN (IP PIN) mismatches, which can sometimes result in incorrect balances
2. Gather Supporting Documents
Before disputing your balance, collect:
- A copy of your IRS notice
- Past tax returns and payment records
- Any correspondence with the IRS related to the issue
- Proof of deductions, credits, or payments made
3. Contact the IRS to File a Dispute
Once you have your documentation, reach out to the IRS:
- Call the number listed on the CP71 notice for immediate assistance
- File a dispute online through the IRS portal
- Mail a written response with copies of supporting documents
4. Act Quickly to Avoid Penalties
Even if the IRS made an error, delaying your response can still lead to additional interest and collection actions. If the dispute is complex, consider consulting a tax professional who can ensure the IRS reviews your case properly.
Always double-check all your information. Accuracy is crucial when dealing with IRS disputes. Even small errors can delay resolution or complicate the process.
Real-World Example of Resolving a CP71 Through a Payment Plan
A warehouse manager working near Hamilton’s Enterprise Park called me last spring in a panic. He’d just opened a CP71 notice showing $4,200 in unpaid taxes from 2022. Here’s what happened. After starting a weekend home repair business in Butler County, he forgot to make quarterly estimated tax payments on that extra income. Now the IRS wanted their money, plus $47 in monthly penalties that kept growing.
He couldn’t afford to miss work for multiple trips to the Cincinnati IRS office, so he drove 40 minutes north to our Dayton tax attorney office. In one meeting, I helped him set up a 36-month installment agreement that froze the penalties. The IRS approved his $135 monthly payment plan with automatic bank drafts, and he kept his contracting business running on weekends without worrying about wage garnishments hitting his day job.
Acting fast on CP71 notices matters. Three months earlier, his balance was $3,800. By the time he called me, penalties had added $400. We stopped tax penalty increases before they got worse.
Strategies for Managing Your Tax Debt Efficiently
Professional Tax Notice Help
Getting help from a tax professional can change everything. They know exactly which forms to file, which deadlines matter, and how to talk to the IRS so they actually listen. If you can’t pay the full amount, they’ll evaluate whether you qualify for an Offer in Compromise (settling for less than you owe) or Currently Not Collectible status (temporarily stopping collections due to financial hardship).
Most tax attorneys and enrolled agents offer free consultations. During that first meeting, they’ll review your notice, explain your options, and tell you exactly what they can do to help. You’ll know the costs upfront before committing to anything. Even if you decide to handle it yourself, that free consultation gives you a roadmap of what needs to happen next.
Tax Balance Payment Options
The IRS offers several payment options based on what you can afford. A Partial Payment Installment Agreement lets you pay less than the full monthly amount if you prove financial hardship. You might pay $200 monthly instead of $500 if that’s all your budget allows after essential expenses.
Set up automatic payments through Direct Debit to avoid missed payments and extra penalties. The IRS pulls the money from your checking account on the same date each month. You can also pay by credit card through IRS-approved processors, though they charge a 1.87% to 1.99% convenience fee. For a $500 payment, that’s about $10 in fees, but it might be worth it if you need the flexibility or want to earn credit card rewards.
IRS Hardship & Tax Debt Relief Programs
If you genuinely can’t afford to pay, the IRS has two backup options. An Offer in Compromise lets you settle for less than you owe. You might owe $20,000 but settle for $5,000 if you can prove that’s all you can pay. Currently Not Collectible status stops all IRS collections while you get back on your feet. No garnishments, no levies, no threatening letters.
Both programs require financial disclosure forms showing your income, assets, and expenses. The IRS wants bank statements, pay stubs, and proof of monthly bills. Processing takes 6-12 months for OIC and 30-60 days for CNC status. You need to show real hardship, not just inconvenience. If you have $50,000 in your 401(k) while claiming you can’t pay a $5,000 tax bill, you’ll get rejected.
Stay on Top of Your Tax Situation
Check your IRS account monthly at IRS.gov to confirm payments posted correctly. Keep every IRS notice and payment confirmation in one folder – you’ll need this paper trail if problems arise.
Tax law changes sometimes create new relief programs. Working with a tax professional ensures you don’t miss opportunities to reduce what you owe when these programs become available.
Common Misconceptions About IRS Notices
Not All IRS Notices Are Doom and Gloom
Most people see an IRS notice and assume the worst. With CP71 notices, that’s a mistake. This is just the IRS’s annual reminder that you have an unpaid balance. It’s not a final warning, not a threat to garnish wages, and not the start of criminal prosecution.
The real danger comes from misreading the notice. Some taxpayers panic and pay money they don’t owe. Others ignore it thinking it’s not urgent, then face bank levies six months later. Read the notice carefully. It tells you exactly what year you owe for, how much the IRS thinks you owe, and what happens next if you don’t respond.
Your Options Are Open
You have three main choices when you can’t pay the full amount:
Payment plans – Pay monthly amounts you can afford. The IRS approves most plans under $50,000 automatically online. For a $10,000 debt, you might pay $140 monthly for 72 months.
Dispute the amount – If the balance looks wrong, call the number on your notice with proof of payments you already made or deductions they missed. The IRS makes calculation errors on roughly 30% of CP71 notices.
Temporary relief – If you’re unemployed or facing medical bills, request Currently Not Collectible status to pause collections until your situation improves.
Pick one option and act within 30 days. Doing nothing guarantees the situation gets worse.
Get Help With the CP71 Notice
We offer consultations where we’ll review your CP71 notice and explain exactly what you’re facing. We’ll tell you if the IRS made calculation errors, which payment options you qualify for, and what it’d look like to handle everything for you.
Our tax attorneys know which IRS employees have authority to approve different solutions. What might take you 20 hours on hold and three rejected applications, we can often resolve with one phone call to the right department.
Even if you decide to handle it yourself after the consultation, you’ll know what forms to file, which deadlines matter, and what documentation the IRS actually needs. That alone can save thousands in unnecessary payments.
What Happens After CP71: The IRS Collection Timeline
Understanding what comes next helps you prepare and avoid surprises. The CP71 is actually the IRS being nice. Here’s what follows if you don’t respond.
30-60 days after CP71: You’ll get a CP504 notice. This one’s more serious. It mentions potential levy of your state tax refund.
90 days later: The CP503 notice arrives, warning about intent to levy your assets. Now they’re talking about taking money directly from your bank account or paycheck.
120-180 days: A Letter 1058 or LT11 shows up via certified mail. This is your Final Notice of Intent to Levy. You have 30 days before the IRS can legally take your money.
After Final Notice: The IRS can garnish wages (taking up to 70% of your paycheck), levy bank accounts (freezing and seizing funds), or file a federal tax lien (destroying your credit and attaching to property).
Final Thoughts on Handling a CP71 Notice
CP71 notices are fixable problems, not disasters. You have 30 days to either set up a payment plan, dispute the amount, or request hardship relief.
The worst response is no response. Ignoring the notice guarantees penalties, interest, and eventual wage garnishment. Taking action now costs less and gives you more options.
Take Control of Your Tax Situation Today
A CP71 notice gives you 30 days to act before penalties increase and collection actions begin. Whether you need a payment plan or want to dispute the amount, responding now keeps you in control.
Here at Silver Tax Group, we handle CP71 responses, IRS negotiations, and payment arrangements daily. We know which solutions you qualify for and how to get them approved quickly. Contact us today for a consultation about your notice.
Frequently Asked Questions About IRS CP71 Notices
What should I do if I receive a CP71 notice from the IRS?
Receiving a CP71 notice means the IRS believes you have unpaid taxes from a previous year. Don’t ignore it. First, review the notice carefully to confirm the amount owed. If the balance is correct, consider setting up a payment plan or exploring IRS relief options. If you believe there’s an error, dispute it immediately with supporting documentation.
Can I ignore a CP71 notice if I can't afford to pay?
No. Ignoring the notice can lead to interest, penalties, and potential IRS collection actions like wage garnishments or tax liens. If you can’t afford to pay, you may qualify for IRS hardship programs like Offer in Compromise (OIC) or Currently Not Collectible (CNC) status, which can lower or temporarily pause payments based on your financial situation.
Is a CP71 notice the same as an audit or a final warning?
No, a CP71 notice is not an audit or an immediate enforcement action. It’s an annual reminder from the IRS about unpaid taxes. However, continued inaction can lead to further collection efforts, so it’s important to address it promptly.
What payment options are available if I agree with the balance?
The IRS offers multiple payment options, including installment agreements, direct debit payments, and credit card payments through authorized processors. Some taxpayers may also qualify for a Partial Payment Installment Agreement, which reduces the total amount owed based on financial hardship.
How can I dispute a CP71 notice if I believe it's incorrect?
If you disagree with the notice, contact the IRS immediately through the number provided on the letter. Be prepared with supporting documents, such as tax returns, payment records, or proof of deductions or credits. If the dispute is complex, working with a tax professional can increase the likelihood of a successful resolution.
