IRS LT16 Notice: What It Means and How to Respond

Notice LT16

IRS collection notices vary in severity. The IRS sends LT16 to people with unpaid taxes and/or unfiled returns. This notice indicates that the agency is stepping up collection actions against you, but it’s not a final notice – in almost all cases, you will receive additional notices before the IRS starts involuntary collections against you. 

At this point, interest and penalties are snowballing on your account, leading to a much larger balance due. But there is still time before the IRS starts garnishing wages or seizing assets. 

To protect your finances, it’s crucial that you act quickly to file the necessary tax returns and set up payment arrangements to avoid levies, liens, and garnishments. The team at Seattle Legal Services can help you respond to your IRS notices and take swift action to avoid aggressive collection actions—just call us at 206-536-3152.

Key Takeaways:

  • What is the LT16? This is an IRS notice about impending collection actions for unpaid or unfiled taxes.
  • How to respond? File back taxes and contact the IRS or a tax pro about payments.
  • Payment options? Depending on your finances, monthly payments, or settlements. 
  • What if you don’t respond? Increasing penalties, liens, levies, and wage garnishments.

What is the IRS LT16 Notice?

The IRS sends the LT16 notice when you have unpaid taxes and they have unsuccessfully attempted to contact you regarding those taxes. This is an urgent notice, so it isn’t quite as routine as those that simply remind you of your debt and request that you make payment arrangements. The tone of LT16 is significantly more urgent, indicating that if you fail to take action, more aggressive collection actions may follow.

If you receive LT16 in the mail, it’s likely that some of these circumstances apply to your current tax situation:

  • You have unpaid tax debt from a previous tax year
  • You have ignored previous IRS notices
  • You have failed to file one or more tax returns
  • You have defaulted on your installment agreement
  • The IRS is getting ready to step up enforcement actions against you

Key Differences Between LT16 and Other IRS Notices

If you have received multiple notices from the IRS, you may wonder what makes LT16 different from the others. Use this table to understand when the IRS chooses each type of notice:

  • LT16 vs. CP14/CP501: CP14 and CP501 are early in the collection process. The IRS sends these notices to remind you that you have outstanding tax debt. LT16 is more aggressive than CP14 and CP501, which means you’re further along in the collection timeline.
  • LT16 vs. CP504: CP504 says the IRS is going to seize your state tax refund and prepare for another collection action. LT16 may not be quite as serious as CP504, but it is still an urgent notice.
  • LT16 vs. Final Notice of Intent to Levy (LT11 or Letter 1058): LT11 and Letter 1058 serve as your last legal notice before the IRS can move forward with immediate levies. These notices may come after you receive the LT16.

First Steps to Take After Receiving Notice LT16

Receiving mail from the IRS is stressful—but staying calm and taking these steps can help you make payment arrangements and avoid more serious issues down the road.

Review the Notice Thoroughly

You should start by reading your LT16 notice in full. The IRS strives to make their notices easy to read, and they generally include all of the information you need to start taking action. Look at the balance due, the deadline for response (typically 10 days), and whether or not the letter references a tax return that has not yet been filed.

Verify Your Balance

If the IRS has been attempting to collect this balance for some time, it’s possible that the balance has changed significantly as penalties and interest have accrued. It’s important to look into your tax account and make sure that the amount they are requesting is appropriate. You can log on to your IRS Online Account, which includes details on filed tax returns, unpaid taxes, and assessed penalties and interest. You can also request a tax transcript that verifies what the letter says.

Resolve the Balance

This is the most important step of this entire process. As you see in LT16, the IRS is referring your account for more aggressive collection actions. If you do not respond to this notice, you could end up fighting liens and levies—and that takes a lot more time, money, and work.

If possible, you can pay the balance in full. However, many people are not in a position to do that, hence the multiple notices. In that case, there are payment options you can explore:

  • Installment agreement: An installment agreement allows you to stretch your payments over a period as a period long as 72 months (and longer in some cases), which can make your tax debt much more manageable. Before you commit to an installment agreement, make sure the monthly payment truly fits in your budget—missing payments can cause you to default on your installment agreement and end up in an even worse position.
  • Offer in compromise: The IRS accepts a limited number of offer in compromise applications every year and rejects around half of all applications. If a taxpayer’s income and assets are limited enough to keep them from paying their tax debt in full, they may be able to settle their tax debt for less with an offer in compromise. You’ll need to provide a significant amount of documentation, so you may want to work with an attorney to make sure you submit the strongest application you can.
  • Penalty abatement: Those who ignore their past-due taxes may find that penalties snowball quickly. If penalties currently make up a significant portion of the total amount you owe, seeking penalty abatement could make your tax debt a little less overwhelming. The IRS may grant penalty abatement if you have a history of tax compliance or if you have reasonable cause for failing to pay.
  • Currently not collectible: You may be in a financial situation that does not allow you to pay anything toward your tax debt. If so, look into currently not collectible status. This is temporary and halts IRS collection activities. However, the IRS will check on your finances from time to time, and they will resume collection activities if your income or assets increase.

Seek Help If Necessary

If you have been holding off on contacting the IRS or a tax attorney, this is the time to act. As stated in your LT16 notice, the IRS expects you to either pay or contact them within 10 days. While we understand that talking to the IRS can be stressful, doing so can actually provide you some relief. Until you contact them, they have no idea what your payment arrangements are, if you are able to pay at all, or even if you’re receiving their notices. They are then forced to proceed with more aggressive collection efforts until something yields a response. If you reach out to them and discuss your financial situation and ability to pay, they may have options for you.

The team at Seattle Legal Services can also help you with LT16 notices, unfiled tax returns, potential settlement options, and enforcement efforts. Our exclusive focus on tax law means that we have both the experience and knowledge needed to tackle your most difficult tax issues. We know that no one intends to end up in trouble with the IRS—and our goal is to help you get caught up, stay compliant, and avoid future tax concerns.

Avoid Delays

Since LT16 comes after several other IRS notices, you want to respond right away when you receive it. Failing to respond may force the IRS’s hand, leading to even more penalties and interest on your account. They may assign a Revenue Officer to your account, which means faster and more aggressive collection efforts. Failure to resolve your past-due taxes may result in liens on your assets, seized assets, and garnished wages.

Potential Consequences of Ignoring LT16

Many people ignore IRS notices, hoping that they’ll fall through the cracks of the enforcement system and be able to address their tax debt when they’re ready. The bad news is that if you’re receiving collection notices, the IRS isn’t going to let up—you’re already part of their automated collection system, and the bigger your tax debt gets, the more likely it is that they will assign a Revenue Officer to your account. 

Once a Revenue Officer is assigned to your account, you’ll have an actual person looking over your tax file on a regular basis and deciding which collection actions are appropriate. Even if you remain in the automated collection system, it’s only a matter of time before you get hit with liens, lose your assets to levies, or get your wages garnished.

How Seattle Legal Services Can Help

At Seattle Legal Services, we take a multifaceted approach to our clients’ tax problems. The IRS is open to a variety of payment options and solutions, but many taxpayers don’t know the options available to them. Depending on your current tax situation, we can provide a variety of solutions:

  • File missing tax returns: By filing missing tax returns, we can stop further failure-to-file penalties, get a full picture of your tax debt, and get on the path to compliance.
  • Set up installment agreements: An installment agreement could help you avoid collection actions and get your tax debt paid off in a reasonable amount of time.
  • Request an offer in compromise: We can take a full look at your financial situation to determine whether or not you qualify. If you do qualify, we’ll work through the application process to give you the best shot at acceptance we can.
  • Negotiate with the IRS directly: By negotiating settlement options with the IRS, we strive to help you avoid losing your bank accounts, wages, and other assets to levies and liens.

If you’ve received LT16 from the IRS and you’re overwhelmed trying to figure out what you should do next, the team at Seattle Legal Services is here to help. Schedule a consultation now by calling us at 206-536-3152 or reaching out online.

Frequently Asked Questions

What is an LT16 notice and why did I receive it?

This is an urgent notice informing you of your tax debt and the IRS’s intent to take collection actions against you if you do not resolve your tax debt.

What steps should I take immediately after receiving an LT16 notice?

You should read the notice in full, verify the amount you owe, and either reach out to the IRS directly or talk to a tax attorney about your options.

Can I dispute the balance shown on the LT16 notice?

You may be able to dispute the amount you owe via a Collection Due Process hearing, but only if you haven’t had a previous chance to dispute. If that option is not available, you may be able to challenge the amount due through another process – such as paying and requesting a refund or applying for a settlement based on doubt as to liability. You should start by checking your tax transcript to look for errors in the amount you owe.

What happens if I ignore this notice?

The IRS may move forward with a variety of collection actions, including liens, levies, and wage garnishments. Before that happens, however, your debt will start to grow substantially with penalties and interest. 

How can I set up a payment plan with the IRS?

Most taxpayers can request an installment agreement online and get a decision immediately. If your debt exceeds certain limits, you may need to apply via a paper form or over the phone.

Can I reduce the amount owed through an offer in compromise?

An offer in compromise may be a suitable option for you if you have limited assets and income. However, the IRS does expect you to exercise every possible payment option before turning to an offer in compromise, so only a handful of taxpayers qualify.

What should I do if I can’t pay the balance in full?

You should contact the IRS or a tax attorney right away—there are payment options available to you, but you cannot exercise your options until you take action.

How does the LT16 notice differ from a Final Notice of Intent to Levy?

The LT16 notice isn’t as severe as a Final Notice of Intent to Levy. However, it is still quite far along in the collection timeline—so a Final Notice of Intent to Levy may be forthcoming.

Will ignoring this notice result in a Revenue Officer visiting me?

A Revenue Officer may or may not be assigned to your case, depending on how much you owe and how long you have avoided communication efforts from the IRS.

How can Seattle Legal Services help me resolve my LT16 notice?

Seattle Legal Services can assist you by getting you caught up on tax returns, negotiating payment agreements with the IRS, and addressing your tax debt quickly to avoid more serious collection efforts.