IRS Notice CP71D Explained: What It Is and What To Do

IRS Notice CP71D is the Annual Reminder of Balance Due the IRS sends to taxpayers who have balances with the IRS that are currently in collections, either through the IRS Automated Collection System (ACS) or through assignment to a field revenue officer.

Since the Notice CP71D is tax year-specific, you may receive multiple CP71D notices if you owe the IRS for multiple tax years.

The IRS sends this notice annually to taxpayers with a tax year that has been either been in ACS collections (“status 22”) or been assigned to a revenue officer (“status 26”) for at least one year.

One of the reasons the IRS sends this notice is because it is legally required to under Internal Revenue Code Section 7524, which states:

“Not less often than annually, the Secretary shall send a written notice to each taxpayer who has a tax delinquent account of the amount of the tax delinquency as of the date of the notice.”

Here is a Notice CP71D that the IRS sent one of our clients.

IRS Notice CP71D At a Glance

IRS Notice CP71D Explained, Part by Part

Here is a full explanation of the Notice CP71D, part by part.

Part 1: Amount Due

On the first page of the Notice CP71D, right at the top, the IRS tells you how much they believe you owe for the year to which this particular notice pertains.

They also provide you with a due date — more on that later.

Part 2: What the IRS Wants You to Do Now

First off, the IRS tells you to work with your revenue officer (if you’ve been assigned one).

Otherwise, the IRS gives you directions on how to pay your balance now online.

Part 3: Consequences If You Ignore This Notice

Next, the IRS tells you what will happen if you ignore your CP71D notice.

Although there are obviously other consequences than those listed here, here are the four listed in this section:

1. Account Transfer to a Private Collection Agency

If you don’t deal with your debt directly with the IRS, it may transfer your debt to one of the three private collection agencies it contracts with to collect taxpayer debt:

• CBE Group, Inc.
• Coast Professional, Inc.
• ConServe

2. Filing of a Notice of Federal Tax Lien

Once a tax debt is assessed, the IRS automatically has the legal right to your income and assets to satisfy your tax liability.

This is sometimes referred to as the IRS’s “secret lien.” It’s “secret” because only you and the IRS know about it — unless you tell somebody else about it.

However, the IRS has the power to let everybody else know about your tax debt.

It accomplishes this by filing a notice of federal tax lien (NFTL) in your country and/or state records.

Once that is done, your tax debt officially becomes public record.

Obviously, most people don’t go thumbing through public lien records — so it’s unlikely to affect your public reputation the way a bad social media post would — but interested parties may include, for example, organizations looking to lend you money.

Speaking of bad social media posts…have you seen the IRS Commissioner’s cat? Check out my YouTube video below to see what I mean.

3. Passport Revocation or Denial

If you owe enough in back taxes — the threshold is currently $62,000 — the IRS may prevent you from obtaining or renewing your passport.

It does this by “certifying” your tax debt to the United States Department of State — basically, telling the State Department that you owe a lot in taxes and therefore it should deny any passport applications you submit.

In certain cases, the State Department may even revoke your existing passport.

So if you are outside the United States — or are planning to travel outside the United States in the near future — it’s essential that you deal with your federal tax debt!

4. Refund Offset

Of course, if you owe the IRS, it will very likely seize your future tax refunds (certainly federal and perhaps state) until your debt is paid off.

Part 4: Options If You Can’t Pay in Full

In the next section, the IRS breaks down, in brief, a few options you can explore if you can’t pay your balance in full by the deadline.

These tax relief options include:

• Installment Agreement (“Pay Over Time”): An installment agreement is an agreement with the IRS to pay your tax debt over time. Obviously, the IRS wants to be paid as quickly as possible, but longer term lengths can be negotiated.
• Offer in Compromise: An offer in compromise is an agreement with the IRS to settle your tax debt for less than you owe in a lump sum paid within five or 24 months.
• Currently Not Collectible (CNC) Status (“Temporarily Delay Collection”): CNC status, also known as the IRS hardship program, is an agreement with the IRS during which the government will not expect you to make payments to them and will not take forced collection activity — such as a wage garnishment, bank levy, or Social Security levy — against you.

Part 5: Billing Summary

In the next section, the IRS informs you of the amount you owe.

Part 6: What You Need to Know

Part 7: Additional Information

Finally, at the end of the CP71D Notice, the IRS provides some additional information, such as:

• The official IRS webpage for the CP71D Notice
• Where you can obtains tax forms, instructions, and publications
• How to contact the IRS

Part 8: Payment Coupon

At the bottom of the final page of the CP71D Notice, the IRS provides you with a payment coupon if you would like to pay off the tax for the year indicated on the notice in one lump sum.

Note that if you have the cash to pay off what you owe for some tax years but not others — and keep in mind that each year would be reported on a separate CP71D — it may be in your best interest to pay off some tax years before others.

Obviously, the IRS isn’t going to tell you this — they are simply going to insist that you pay off everything by their deadline.

What to Do If You Received Notice CP71D From the IRS

If you received a CP71D Notice from the IRS, you need to take action immediately on your account.

Unlike other CP71-series notices, the CP71D Notice indicates that you are in active collections with the IRS — either through the Automated Collection System (ACS) or with a revenue officer.

The best thing you can do when receiving this notice from the IRS is to put together a game plan to determine how you’re going to tackle this tax debt.

Your options include:

• Entering into an installment agreement with the IRS to pay off your tax debt — or a portion of it — over time
• Convincing the IRS that you can’t pay them anything right now, resulting in you being placed in currently not collectible (CNC) status
• Submitting an offer in compromise to the IRS to settle your tax debt for less than you owe

If you’d like more information about any of this tax relief options, be sure to check out our article explaining what tax relief is or watch the video below to learn about the tax debt forgiveness programs.

Author:

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Logan Allec, CPA, Founder and Owner

Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.

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