IRS Notice LT39: What It Is and What to Do
IRS Notice LT39 is a reminder notice that the IRS sends to taxpayers who owe $10,000 or more to inform them of the amount they owe the IRS.
The IRS typically sends this notice to a taxpayer when it is preparing to determine whether or not to file a Notice of Federal Tax Lien against the taxpayer.
Here is a redacted Notice LT39 that the IRS sent one of our clients.
Table of Contents
IRS Notice LT39 At a Glance
Notice Type: | Reminder Notice |
Generated By: | IRS ACS |
Preceded By: | At Least One Other LT or CP Notice |
Followed By: | Notice of Federal Tax Lien Determination |
Recommended Action: | Pay Off Balance Due or Enter Into Resolution |
IRS Notice LT39 Explained, Part by Part
Here is a full explanation of the Notice LT39, part by part.
Part 1: Please Act On Your Balance
The first thing you’ll see on your LT39 Notice is the IRS’s demand that you take action on your outstanding tax balance.
In most LT39s, the IRS indicates — down to the penny — what your current balance is.
That said, 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.
The IRS also informs you that you can disregard this notice if you’re already working on a resolution with them.
Part 2: What the IRS Wants You to Do Immediately
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.
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 LT39.
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.
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: 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 6: Consequences If You Don’t Pay
Next, the IRS tells you what will happen if you do not pay your taxes
Although there are obviously other consequences of not paying your taxes than those listed here, here are the three listed in this section:
1. 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.
2. Levy
In this paragraph, the IRS is telling you that it can eventually start taking your stuff — and, specifically, your money — if you don’t deal with your tax debt.
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!
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.
It also informs you that if you filed your return jointly, it will send separate LT39 Notices to each spouse.
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 LT39 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 LT39
The IRS typically sends the Notice LT39 to a taxpayer when:
- The taxpayer owes at least $10,000 to the IRS — or at least the IRS believes the taxpayer owes money to the IRS.
- 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 LT39 Notice
Below are the steps you should take after you receive an LT39 Notice.
For more information about each of these steps, check out our article How to Fight the IRS and Win.
Step 1: Check the LT39 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 LT39 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: 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 4: 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?.