Tax debt words, in plain English

A

Assessment

When the IRS records a tax you owe on its books. The 10 year collection clock starts here. Source

Automatic Exemption from Penalty (AEP)

New IRS relief starting summer 2026. With a clean 3 year record, some penalties are not charged at all. Source

B

Bank levy

An IRS levy on a bank account. The bank holds the money 21 days, then sends it to the IRS. Source

C

Circular 230

The rules for who can practice before the IRS, like attorneys, CPAs and enrolled agents. Source

Collection Appeals Program (CAP)

A way to appeal some collection actions before they happen, like a levy or lien. Source

Collection due process (CDP) hearing

A hearing with the IRS Independent Office of Appeals before a levy. Ask with Form 12153. Source

Collection statute expiration date (CSED)

The end of the IRS's time to collect a tax. It is generally 10 years after the tax is assessed. Source

CP14

The first IRS bill that says you owe unpaid taxes. Source

CP2000

An IRS notice that income reported to it doesn't match your return. It is not a bill. Source

CP504

An IRS notice of intent to levy. It is a reminder before the IRS starts to levy. Source

Currently not collectible (CNC)

A status where the IRS pauses most collection because you can't pay basic living costs. You still owe the debt. Source

D

Direct debit installment agreement (DDIA)

A long term plan paid by automatic monthly withdrawals from your bank. It has the lowest setup fee. Source

E

Enrolled agent

A tax pro licensed by the IRS who can represent you on any IRS matter. Source

Estimated tax

Tax you pay during the year on income with no withholding, like 1099 pay. Source

F

Failure to file penalty

A penalty of 5% of the unpaid tax for each month a return is late, up to 25%. Source

Failure to pay penalty

A penalty of 0.5% of the unpaid tax for each month it stays unpaid, up to 25%. Source

Federal Payment Levy Program (FPLP)

An IRS program that takes part of certain federal payments, like some Social Security benefits, for tax debt. Source

Federal tax lien

The government's legal claim on your property when you don't pay a tax debt. Source

First Time Abate (FTA)

IRS relief from some penalties if you filed and paid on time for the 3 years before. Source

Form 1099-DA

A new form brokers use to report digital asset sales, starting with 2025 sales. Source

Form 1099-K

A form that reports payments you got through cards, payment apps or online marketplaces. Source

Form 12153

The form to ask for a collection due process hearing. Source

Form 2848

A power of attorney form. It lets a tax pro speak to the IRS for you. Source

Form 433-A

A form that lists your income, bills and assets so the IRS can see what you can pay. Source

Form 656

The form to apply for an offer in compromise. It comes in the Form 656-B booklet. Source

Form 8379

The form to ask for injured spouse relief, to get back your share of a joint refund. Source

Form 843

The form to ask the IRS for a refund or to remove a penalty in writing. Source

Form 8857

The form to ask for innocent spouse relief. Source

Form 9465

The form to ask for an IRS payment plan by mail. Source

I

Identity protection PIN (IP PIN)

A 6 digit number from the IRS that stops others from filing a return with your Social Security number. Source

Injured spouse relief

A way to get back your part of a joint refund that was taken to pay your spouse's debts. Source

Innocent spouse relief

Relief from tax your spouse caused on a joint return, if you didn't know about the errors. Source

Installment agreement

The IRS name for a payment plan. You pay what you owe in monthly payments. Source

L

Levy

A legal seizure of your property to pay a tax debt. It actually takes the property. Source

Lien discharge

Removal of the lien from one piece of property, often so it can be sold. Source

Lien release

When the IRS removes a lien. It happens within 30 days after you pay the debt in full. Source

Lien subordination

Letting another lender go ahead of the IRS, which can help you get a loan. Source

Lien withdrawal

Removal of the public lien notice. You still owe the debt. Ask with Form 12277. Source

N

Notice of Federal Tax Lien

A public notice the IRS files to tell creditors it has a claim on your property. Source

Notice of intent to levy

An IRS notice that it plans to take your property. CP504 is one. LT11 and Letter 1058 give hearing rights. Source

O

Offer in compromise (OIC)

A deal where the IRS agrees to take less than the full amount you owe. It costs $205 to apply, plus a first payment. Source

P

Penalty abatement

When the IRS removes or lowers a penalty. Source

Private collection agency

A company the law requires the IRS to use for some old tax debts. Notice CP40 names yours. Source

R

Reasonable cause

A good reason you couldn't file or pay on time, like a fire, a disaster or a serious illness. Source

S

Self employment tax

Social Security and Medicare tax for people who work for themselves. The rate is 15.3%. Source

Separation of liability

Relief that splits extra tax on a joint return so you pay only your share. You must be divorced, separated or living apart. Source

Seriously delinquent tax debt

Federal tax debt over $66,000 for 2026, after a lien or levy. It can lead to passport denial. Source

Short term payment plan

A plan to pay in full within 180 days. There is no setup fee. Source

Substitute for return (SFR)

A return the IRS files for you when you don't file. It may leave out deductions you could claim. Source

T

Taxpayer Advocate Service (TAS)

An independent office inside the IRS that helps people with problems they can't fix on their own. Source

Treasury Offset Program

A federal program that can take your tax refund to pay other debts, like state taxes or child support. Source

Trust Fund Recovery Penalty (TFRP)

A penalty that makes the people in charge of a business personally owe its unpaid trust fund taxes. Source

Trust fund taxes

Taxes a business holds back from workers' pay, like income tax and the worker's share of Social Security and Medicare. Source

W

Wage levy

An IRS levy on your pay. Part of each paycheck goes to the IRS until it is released. Often called a garnishment. Source