CP71C Notice
The CP71C is an annual IRS reminder notice informing you that you still have an outstanding tax balance that has not been resolved. The notice also warns that the IRS may offset any federal payments you receive — including Social Security — against your outstanding balance.
Why Did You Receive This Notice?
You received a CP71C because you have an unresolved tax liability from a prior year that has been in a non-collectible or currently-not-collectible status, or that has been in the IRS collection queue without resolution. The IRS sends the CP71C once a year as a formal reminder that the balance still exists, interest is still accruing, and collection activity may resume.
What Does this Mean for You?
The CP71C means the IRS has an open balance on your account and is officially reminding you that you still owe this money. The notice includes the total balance — tax, penalties, and accrued interest. It also includes a warning that the IRS may intercept any federal payment you receive, including Social Security benefits, federal retirement payments, or federal tax refunds.
What Happens If You Ignore It?
Your Options
- Pay in full: If you can now afford to pay the full balance, doing so stops all further interest and penalty accrual and closes the matter entirely.
- Set up an installment agreement: If you can't pay all at once, request a payment plan through irs.gov or by calling the IRS. Monthly payments will stop the escalation.
- Explore tax resolution options: Depending on your financial situation, you may qualify for an Offer in Compromise (settle for less than owed), Currently Not Collectible status, or penalty abatement. These require a formal application.
- Request penalty abatement: If you have a history of compliance, you may qualify for first-time penalty abatement, which can significantly reduce the total balance.
Step-By-Step: What To Do Next
Step 1: Review the CP71C and confirm the balance due, including the breakdown of tax, penalties, and interest.
Step 2: Log into your IRS Online Account to verify the current balance and see the full history of the debt.
Step 3: Determine whether you can pay in full, need a payment plan, or may qualify for a resolution program.
Step 4: If paying, do so at irs.gov to get immediate confirmation.
Step 5: If requesting a payment plan, apply online through irs.gov or call the IRS.
Step 6: If you believe the balance is incorrect, request a transcript and review the account history.
Can You Handle this Yourself?
You can set up an IRS payment plan on your own through irs.gov without professional help. If you owe under $50,000 and can pay within 72 months, you likely qualify for an online payment agreement. If you want to explore resolution options like an Offer in Compromise, the process is more involved and professional assistance is often worthwhile.
Expert Insight From Rockwater Tax
At Rockwater Tax, the CP71C is often the notice that motivates clients to finally address a long-standing tax debt. The good news is that options exist. The bad news is that interest has likely been compounding the whole time. The sooner you act, the less the final resolution will cost. We often find that first-time penalty abatement alone can save clients thousands of dollars on old balances.
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FAQ
Q: Can the IRS take my Social Security benefits because of a CP71C?
A: Yes. The CP71C specifically warns that the IRS can offset federal payments, including Social Security benefits, through the Federal Payment Levy Program. Setting up a payment plan can stop this.
Q: Is there a statute of limitations on collecting this debt?
A: The IRS generally has 10 years from the date of assessment to collect a tax debt. After that, the liability expires — but that clock can be paused in certain circumstances.
Q: Can I negotiate the amount I owe?
A: Potentially. An Offer in Compromise allows eligible taxpayers to settle their tax debt for less than the full amount. Qualifying depends on your income, assets, and expenses.
