What Is a CP71H Notice and How Should You Respond to It?

Receiving a CP71H Notice from the IRS can be concerning, as it indicates an outstanding tax balance. This notice serves as a reminder of unpaid taxes and details the amount owed, including penalties and interest. While it does not demand immediate payment, ignoring it can lead to further collection actions.

Common Reasons This Notice Is Issued

A CP71H Notice is sent annually to remind taxpayers of unresolved tax debts. The IRS tracks these balances, applying interest and penalties until they are paid.

One common reason for receiving this notice is unpaid taxes from prior years. If a taxpayer filed a return but did not pay the full amount owed, a failure-to-pay penalty of 0.5% per month applies, up to a maximum of 25%. Interest accrues daily based on the federal short-term rate plus 3%, adjusted quarterly.

Another reason could be an unresolved balance from an audit adjustment. If the IRS reviewed a return and determined additional tax was due—perhaps due to disallowed deductions, underreported income, or incorrect credits—the taxpayer remains responsible for the balance unless they formally dispute it.

Taxpayers who default on an installment agreement may also receive this notice. If payments stop, the IRS resumes collection efforts. This can also apply to individuals previously classified as “Currently Not Collectible” due to financial hardship if their financial situation has improved.

How to Confirm the Notice Is Legitimate

Scammers frequently impersonate the IRS, so verifying the authenticity of a CP71H Notice is essential. The IRS only sends official notices through the U.S. Postal Service—never by email, text, or phone.

A legitimate CP71H Notice includes your full name, a partially masked taxpayer identification number, and a notice number in the upper right corner. It will also list the amount owed, a breakdown of interest and penalties, and IRS contact information. The phone number should match the one listed on the IRS website.

To confirm the notice’s legitimacy, log into your tax account on the IRS website. If the amount listed in your account matches the CP71H, the notice is authentic. If the notice demands payment through unusual methods like gift cards or wire transfers, it is a scam.

Payment Methods

Taxpayers can resolve their balance through several payment options. The IRS Direct Pay system allows fee-free transfers from a checking or savings account, with immediate confirmation. Debit and credit card payments are also accepted through authorized third-party processors, though processing fees apply.

For those unable to pay in full, the IRS offers installment agreements. Short-term plans, available for balances under $100,000, provide up to 180 days to pay without a formal application. Long-term agreements, for balances up to $50,000, allow monthly payments but may include setup fees. Direct debit plans reduce the risk of missed payments.

If full payment is not feasible, an Offer in Compromise (OIC) may be an option. This program allows eligible taxpayers to settle their debt for less than the full amount owed if they can demonstrate financial hardship. The IRS evaluates OIC applications based on income, expenses, asset equity, and ability to pay. Approval is not guaranteed, but those who qualify can significantly reduce their tax burden.

Disputing or Correcting the Amount

Errors in a CP71H Notice can result from misapplied payments, outdated records, or incorrect assessments. Reviewing prior tax returns, IRS transcripts, and payment confirmations can help identify discrepancies. Tax transcripts, available through the IRS online portal, provide a history of tax filings, income reporting, and payments.

If a payment was made but not credited, submitting proof—such as bank statements, canceled checks, or electronic payment confirmations—can help resolve the issue. The IRS occasionally misallocates payments, particularly if an incorrect tax year or form number was referenced. In such cases, contacting the IRS and requesting a payment trace using Form 3911 can expedite corrections.

If the assessed tax is incorrect, filing an amended return using Form 1040-X may be necessary. This applies if income was reported inaccurately, deductions were overlooked, or credits were miscalculated. If the error stems from an IRS adjustment rather than a taxpayer mistake, submitting a formal dispute through a written request or filing Form 843 for an abatement of interest and penalties may be appropriate.

Potential Penalties for Ignoring the Notice

Ignoring a CP71H Notice can lead to escalating consequences. While this notice is a reminder rather than an immediate demand for payment, continued inaction may result in more aggressive collection efforts, including liens, levies, and additional penalties.

A federal tax lien is one of the first enforcement actions the IRS may take. This legal claim against a taxpayer’s property is recorded in public records and can negatively impact creditworthiness, making it more difficult to secure loans or sell assets. If the debt remains unpaid, the IRS may proceed with a levy, allowing the agency to seize wages, bank accounts, or other financial assets. In extreme cases, the IRS can garnish Social Security benefits or seize real estate. Interest and penalties continue to accumulate, increasing the total amount owed.

Seeking Professional Assistance

Resolving an outstanding tax balance can be complex, especially if the amount is disputed or financial hardship prevents immediate payment. Consulting a tax professional, such as a certified public accountant (CPA), enrolled agent, or tax attorney, can help navigate available options and ensure compliance with IRS procedures. These professionals can review tax records, identify errors, and negotiate payment arrangements or settlements on a taxpayer’s behalf.

For individuals facing financial distress, professional assistance is especially beneficial when applying for relief programs such as an Offer in Compromise or requesting penalty abatement. Tax professionals can also help prevent aggressive collection actions by communicating directly with the IRS and ensuring that all necessary documentation is submitted correctly. If a taxpayer cannot resolve the issue independently, legal representation may be necessary to challenge IRS determinations or negotiate more favorable repayment terms.