IRS Notice LT16: What It Is and What to Do

IRS Notice LT16 is a notice that the IRS issues to taxpayers who have a balance due, urging them to take action on their balance.

The LT16 is also sent to taxpayers who have a “combo account” with the IRS, meaning that they have a balance due for some years and missing returns for other years; for these taxpayers, the LT16 serves a double purpose — to urge them to not only act on their existing balance but to also file their missing returns.

Be Aware: The IRS is sending out LT16s en masse again in January and February 2025.

Here is the redacted version of a Notice LT16 that the IRS sent one of our clients with a “combo account.”

IRS Notice LT16 At a Glance

IRS Notice LT16 Explained, Part by Part

Here is a full explanation of the Notice LT16, part by part.

Part 1: Please Act on Your Balance (and File Your Missing Returns)

The first thing you’ll see on your LT16 Notice is the IRS’s demand that you take action on your outstanding tax balance and, if applicable, file any missing tax returns.

In most LT16s, the IRS indicates — down to the penny — what your current balance is, though we are seeing some of our clients receiving an LT16 Notice that simply states, “Please act on your unpaid balance” without providing a summed total.

That said, whichever version you receive, you may find some reassurance in the language used here; the IRS is urging you to “act on” your overdue taxes — less demanding language than the “Amount Due Immediately” language found in more significant notices such as the LT11.

Of course, in the small print, the IRS does remind you of its awesome collection authority “which may include seizing assets or wages” and that you need to do something about your tax debt to protect yourself from IRS enforcement activity against you.

Part 2: What the IRS Wants You to Do “Right Now”

Next, the IRS tells you what it wants you to do “right now.”

The first three bullet points in this section, unsurprisingly, have to do with paying off your tax debt:

• in full (the IRS’s obvious preference),
• in an installment agreement over time,
• or simply as much as you can right now.

The next bullet point lets you know that on the next page there is more information about what you can do if you’re unable to pay your taxes due to financial hardship.

Finally, if you do have a “combo account” with the IRS, there will be a fifth bullet point instructing you to file your missing returns within 10 days of the notice.

Part 3: Official Notice Webpage

Next, in a small box, the notice provides you with the link for the IRS’s official webpage for Notice LT16.

While somewhat hopeful, most of the IRS’s official webpage is a regurgitation of what already appears in the notice itself.

Part 4: Your Billing Summary

Next, the IRS provides you with a year-by-year summary of what they believe you owe.

Our client only owed for one tax year, so that’s why he only has information for tax periods ending “12/31/2014” (there are two rows for this year since the client owed regular income tax as well as the shared responsibility payment for not having health coverage for the entire year).

Here is a quick legend on each of the column’s you’ll see for each tax year:

• Tax period ending: This is the last day of the tax period — typically a year but in some cases a quarter — for which you have a balance due.
• Form number: This is the type of tax form you filed (or for which the IRS filed a substitute for return) giving rise to the balance due.
• Amount you owed: This is the amount of underlying tax liability owed on the return when filed.
• Interest: This is the amount of interest the IRS has added to your initial balance.
• Failure-to-pay penalty: This is the amount of failure-to-pay penalty the IRS has added to your initial balance. Note that you may be liable to other or additional penalties than the failure-to-pay penalty, and if so, these penalties would each have their own column here.
• Total: This is the sum of the “amount you owed” as well as your accumulated interest and penalties.

Part 5: Summary of Missing Tax Returns

Next, the IRS shows you a list of the tax returns it believes that you are “missing.”

Note, however, that you may not want to file all the returns on this list.

This is because the IRS has a six-year rule when it comes to filing missing tax returns.

Want more information about this? Check out my article on how to file back tax returns or watch my YouTube video on filing back tax returns below.

Part 6: What to Do If You Can’t Pay Due to Financial Hardship

Next, the IRS gives you a couple potential options if you believe that you can’t pay your tax bill due to financial hardship.

Option #1: Temporarily Delay Collection

Although it doesn’t explicitly say it, what the IRS is referring to here is currently not collectible (CNC) status.

Why is CNC status merely a “temporary delay”? Because if once you start making more money — as indicated on your tax return — the IRS may remove you from CNC status and insist that you prove to them (based on your financial situation) why you should remain in CNC status.

Option #2: Settle Your Tax Debt

The next option the IRS informs you of is the offer in compromise, which is an agreement with the IRS to settle your tax debt for less than you owe.

Most taxpayers who owe the IRS do not qualify for an offer in compromise.

While the offer in compromise pre-qualifier tool at irs.gov/offers is somewhat helpful, you really have to understand the rules when it comes to how the IRS calculates your offer in compromise amount.

You can learn more about the IRS’s offer in compromise formula in this article or by watching my YouTube video below.

Part 7: IRS Help

Next, the IRS provides you with basic IRS contact information — via telephone or mail — and the link on the IRS website to find tax forms and publications.

Part 8: Taxpayer Rights and Sources for Assistance

In this section, the IRS provides you with some information about the Taxpayer Bill of Rights, IRS Publication 1, Low-Income Taxpayer Clinics (LITC), and the Taxpayer Advocate Service.

Part 9: Payment Coupon

At the bottom of the last page of the Notice LT16 is the payment coupon that you would submit with your payment if you intend to pay the amount on the notice in full or in part via paper mail.

When the IRS Sends Notice LT16

The IRS typically sends the Notice LT16 to a taxpayer when:

1. The taxpayer owes money to the IRS — or at least the IRS believes the taxpayer owes money to the IRS.
2. The taxpayer has not paid off this tax debt or entered into some kind of resolution with the IRS for it.

What You Should Do If You Receive an LT16 Notice

Below are the steps you should take after you receive an LT16 Notice.

For more information about each of these steps, check out our article How to Fight the IRS and Win.

Step 1: Check the LT16 Notice for accuracy.

Don’t assume that the IRS did their math correctly — review the IRS’s numbers against your own.

Step 2: Correct any errors with the IRS.

If you do find an error in the IRS’s math, take it up with them.

There should be phone numbers in the LT16 Notice itself that you can call to discuss your disagreement with the IRS’s numbers:

• For example, in the “What you need to do immediately” section, there will likely be a phone number that you can call to “discuss your options.”  If you disagree with the tax amount itself, call this number.
• In the “Penalties” section, there should be a number indicated that you can call to obtain a “detailed calculation of your penalty charges.”  If you disagree with the IRS’s penalty calculation, call this number.

You can always reach out to us at at 866-8000-TAX to go to bat against the IRS for you.

Step 3: File unfiled returns.

The LT16 Notice will make you aware of any tax returns that the IRS believes you have not filed.

Should you file all of these returns?

Yes, but only to the extent that it is in your best interest, taking into account the following three things:

1. The IRS considers you in tax filing compliance if you have filed the last six years of tax returns (to the extent required).
2. You need to file at least the last six years of tax returns (to the extent required) in order to enter into a resolution with the IRS.
3. The statute of limitations on assessment never starts running for a tax period until you file a return for that period.

Step 4: Seek penalty abatement.

For most of our clients with penalties on their account, we at least seek some sort of penalty relief for them.

Sometimes the IRS grants it; sometimes they don’t.

But it’s generally at least worth a shot.

For more information about seeking abatement for the penalties on your account, check out this article.

Step 5: Pay the balance due OR seek tax relief.

Finally, you have to figure out what to do with the amount you owe the IRS after you’ve cleared up any disagreements with them concerning the amount as well as obtained any possible penalty relief for your account.

You can, of course, pay off your balance in full.  This will (obviously) stop future penalties and interest from accruing.

However, a better option — if you qualify for it — is an offer in compromise.  An offer in compromise is an agreement you make with the IRS in which the IRS agrees to accept a lower amount to satisfy your tax debt than you actually owe.

That said, not all taxpayers qualify for an offer in compromise, so there are other options, such as a temporary hardship placement called currently not collectible status as well as installment agreements for taxpayers who wish to pay their balance over time.

For an overview of how tax relief works, read our article What Is Tax Relief and How Does It Work?.

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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