IRS Notice Codes Explained: What Each Code Means
Receiving an IRS notice can be confusing and stressful. Each notice code tells you exactly what type of penalty or issue you're facing. Here's a comprehensive guide to the most common IRS penalty notice codes.
Failure to Pay Notice Codes
CP14 - Balance Due Notice
What it means: You owe taxes and haven't paid the full amount.
Penalty: Failure to pay penalty (0.5% per month)
Action required: Pay the balance or set up a payment plan within 30 days.
Relief options: First Time Abatement, Reasonable Cause, Payment Plan
CP161 - Second Balance Due Notice
What it means: You still owe taxes after the first notice (CP14).
Penalty: Continued failure to pay penalty
Action required: Pay immediately or contact IRS to avoid collection action.
Relief options: Payment Plan, Offer in Compromise, Currently Not Collectible
CP501 - Reminder Notice
What it means: You haven't responded to previous notices. Collection action may begin.
Penalty: Failure to pay penalty continues to accrue
Action required: Pay in full or contact IRS immediately
Relief options: Installment Agreement, Hardship Status
Failure to File Notice Codes
CP515 - Request for Tax Return
What it means: IRS hasn't received your tax return and believes you're required to file.
Penalty: Failure to file penalty may be assessed
Action required: File your return immediately or explain why you're not required to file.
Relief options: First Time Abatement, Reasonable Cause
CP516 - Income Tax Return Delinquency
What it means: Your tax return is significantly overdue.
Penalty: Failure to file penalty (5% per month, up to 25%)
Action required: File return immediately to stop penalty from increasing.
Relief options: File return + penalty abatement request
CP518 - Request for Tax Return (Final Notice)
What it means: Final notice before IRS prepares a return for you (Substitute for Return).
Penalty: Maximum failure to file penalty (25%)
Action required: File your return within 30 days or IRS will file for you.
Relief options: File original return to replace substitute return
Estimated Tax Notice Codes
CP2000 - Underreporter Inquiry
What it means: IRS computer matched your return with third-party reports and found discrepancies.
Penalty: Potential accuracy-related penalty (20%)
Action required: Respond within 30 days - agree, disagree, or provide explanation.
Relief options: Reasonable Cause, Accuracy-Related Penalty Relief
Collection Notice Codes
CP503 - Urgent - Balance Due
What it means: You haven't responded to previous notices. Collection action is imminent.
Penalty: All applicable penalties continue
Action required: Pay immediately or IRS may levy your assets.
Relief options: Payment plan, levy release, collection alternatives
CP504 - Intent to Levy
What it means: IRS intends to levy your state tax refund and other assets.
Penalty: All penalties continue + collection costs
Action required: Pay in full or contact IRS within 30 days.
Relief options: Collection Due Process hearing, installment agreement
Business and Employment Tax Codes
CP566 - Employment Tax Delinquency
What it means: You haven't filed required employment tax returns (941, 940, etc.).
Penalty: Failure to file and failure to deposit penalties
Action required: File all missing returns immediately.
Relief options: First Time Abatement, Reasonable Cause
Quick Action Guide by Notice Type
Immediate Actions by Notice Code:
High Priority (Act within 30 days):
- • CP503, CP504 - Risk of levy
- • CP518 - Substitute return threat
- • CP2000 - Response deadline
Medium Priority (Act within 60 days):
- • CP14, CP161 - Payment due
- • CP515, CP516 - File return
- • CP566 - Business filing
Don't Ignore IRS Notices
Each notice code represents a specific issue that requires prompt attention. Ignoring notices leads to escalating penalties and potential collection actions. Understanding your notice code is the first step toward resolving your tax issue.
Get help responding to your IRS notice with our penalty relief document preparation tools. We can help you understand your options and prepare the right response.