When the IRS believes a taxpayer has an unpaid balance due, the agency will send out a CP161 Notice. Taxpayers have less than two weeks to respond based on the date of the notice, which means that prompt action is imperative to resolving the problem.

What is a CP161 Notice

When a taxpayer receives a CP161 notice, it's important to read the document carefully. It should include:

·        The tax amount due

·        How the IRS calculated that amount

·        What payments the IRS has already credited to a taxpayer's account

Taxpayers have 10 days from the date of the notice to respond to a CP161 Notice. The IRS recommends comparing the numbers on the notice to those on the relevant tax return. 

If a taxpayer agrees with the IRS's calculations, they must pay the outstanding amount due by the date of the notice. In situations when a taxpayer disagrees with the IRS or is unable to pay the full amount, they should still contact and work with the IRS.

What to Do if a Taxpayer Disagrees with a CP161 Notice

If a taxpayer believes they don't owe additional money or the IRS incorrectly calculated the amount due, they have to contact the IRS or authorize someone (such as a tax attorney) to speak with the IRS on their behalf. Taxpayers who want someone else to speak with the IRS will need to submit Form 2848, Power of Attorney and Declaration of Representative to the IRS. 

CP161 Notices, Penalties, and Interest

If a taxpayer pays the full amount due by the notice date, they won't have to pay any additional interest. After the notice date, interest will once again accrue on the outstanding amount. Taxpayers will also face financial penalties for not paying by the notice date.

If a taxpayer is unable to pay the full amount by the notice date, they or their representative should contact the IRS to set up a payment plan. What taxpayers shouldn't do is avoid responding to the notice or hope that the problem will disappear.

​​If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.