IRS Collection Notices, Audits, and Final Warnings: What to Do Right Now
Opening your mailbox and finding a letter from the IRS is never a good feelingespecially when that letter contains terms like “Final Notice,” “Intent to Levy,” or “Audit Notification.”
Paulette Fenton, MSA, EA
7/3/20252 min read
In this article, we’ll break down what these notices mean, what the IRS can legally do next, and what you should do immediately to protect your finances and peace of mind.
Whether you're an individual or a small business owner, tax notices can be intimidating and confusing. But here's the most important thing to remember:
Do not ignore them. IRS problems don’t go away, they get worse.
Types of IRS Notices You Shouldn’t Ignore
Not all IRS letters are created equal. Here are some of the most common collection and audit-related notices:
🔹 CP504 – Final Notice of Balance Due
This is one of the last letters the IRS sends before taking collection action. It warns that the IRS intends to levy (seize) your state refund and possibly your bank account or wages.
🔹 LT11 or Letter 1058 – Intent to Levy
These letters mean business. They’re the IRS’s legal notice that they will begin seizing your assets unless you take action within 30 days.
🔹 Audit Notification (Form 566, Letter 2205, or CP75)
An audit notice indicates the IRS wants to take a closer look at your return. This doesn’t necessarily mean you did anything wrong, but it does require a serious and well-prepared response.
What Happens If You Ignore IRS Notices?
Let’s be clear: ignoring the IRS is one of the costliest mistakes you can make. If you fail to respond to collection notices or audit letters, here’s what could happen:
Bank Account Levies – The IRS can seize the funds in your checking or savings account.
Wage Garnishments – They may contact your employer and take a portion of your paycheck.
Tax Liens – Public records are filed against your property, damaging your credit and reputation.
Passport Revocation – Owe more than $62,000? Your passport can be denied or revoked.
Business Disruption – If you're self-employed, they can levy accounts receivable or assets.
What You Should Do Immediately
Whether you’ve received your first notice or your final warning, here’s how to take back control:
1. Read the Notice Carefully
Look for the type of letter (CP504, LT11, etc.)
Note the amount due and response deadline
4. If You're Being Audited
Before you reach out, gather:
The letter you received
Your last few years of tax returns
Any documentation related to your case (income, expenses, past payments)
2. Don’t Call the IRS Empty-Handed
If You Agree with the Balance
Pay in full, or set up a payment plan (Installment Agreement – IRS Form 9465)If You Can’t Pay in Full
Consider an Offer in Compromise (settle for less), request “Currently Not Collectible” status, or apply for a Partial Payment PlanIf You Disagree with the Notice
You may have the right to appeal.
3. Take Action Based on Your Situation
Don’t panic, many audits are resolved with documentation
Only answer what is asked, don’t volunteer extra info
Strongly consider working with a tax professional or Enrolled Agent
✅ How to Avoid Collection Trouble in the Future
Prevention is always better than damage control. To stay out of IRS trouble:
File all required returns on time—even if you can’t pay in full
Make estimated tax payments if you're self-employed
Use a bookkeeper or tax pro if your situation is complex
Keep thorough records of income, expenses, and prior notices