IRS Notice LT39 is a reminder that you have an overdue tax balance, unfiled returns, or both, and the IRS wants you to act before the account moves further into collection. It is not the last warning you will get, but every week you wait costs money in penalties and interest, and eventually the IRS will move on to notices that authorize liens and levies. The good news is that responding is usually straightforward, and several options exist even if you cannot pay the full balance today.
What to Do First When the LT39 Arrives
Read the notice carefully. The LT39 lists the tax year involved, the total balance broken into tax, penalties, and interest, and a payment deadline. Match the taxpayer identification number on the notice against your Social Security Number or Employer Identification Number to confirm the account is actually yours. If your records show you already paid, call the number printed on the notice and ask the representative to correct the account.1Internal Revenue Service. Understanding Your LT39 Notice
If the notice says you have missing returns, file those before you do anything else. When a return is unfiled, the IRS estimates what you owe using the information reported by employers and payers, and that estimate rarely accounts for deductions or credits you would have claimed. Filing the actual return often reduces the balance, sometimes substantially. Unfiled returns also tend to push the account through the collection pipeline faster.
Once the returns are in and the balance is accurate, you have three practical paths: pay in full, arrange a payment plan, or ask for one of the relief options that exist for taxpayers who genuinely cannot pay.
Why the Balance Keeps Growing
The number on your LT39 is almost certainly larger than the tax you originally owed. Two charges begin accumulating the moment you miss a payment deadline.
The failure-to-pay penalty runs at 0.5% of the unpaid tax per month or partial month, capped at 25% of the original balance. On a $10,000 debt, that is $50 a month until the cap is reached. If the IRS issues a notice of intent to levy and you still do not pay, the rate doubles to 1% per month.2Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
Interest compounds daily on top of the penalties at the federal short-term rate plus three percentage points. For the first quarter of 2026, that rate is 7% annually. The rate for the second quarter of 2026 drops to 6%.3Internal Revenue Service. Quarterly Interest Rates There is no cap on interest, which is why responding quickly saves real money.
Payment Options
Pay in Full or on a Short-Term Plan
The fastest way to stop penalties and interest from growing is to pay the full balance. IRS Direct Pay draws the money straight from your bank account, is free, and does not require an account sign-in. Individual payments are capped at $10 million.4Internal Revenue Service. Direct Pay With Bank Account
If you need a few extra months, the IRS offers short-term payment plans of up to 180 days with no setup fee. Penalties and interest continue to accrue during that window, but you avoid the cost of a formal installment agreement.5Internal Revenue Service. Payment Plans; Installment Agreements
Long-Term Installment Agreement
If you need more than 180 days, you can request monthly installments. Setup fees for 2026 depend on how you apply and whether payments come out automatically:
- Direct debit set up online: $22
- Direct debit set up by phone, mail, or in person: $107
- Non-direct-debit set up online: $69
- Non-direct-debit set up by phone, mail, or in person: $178
- Low-income taxpayers: fee waived for direct debit; $43 for non-direct-debit, which may be reimbursed5Internal Revenue Service. Payment Plans; Installment Agreements
If your total balance is $50,000 or less, you can apply entirely online through the IRS Online Payment Agreement tool without filing any paper forms. For balances above $50,000, file Form 9465 along with Form 433-F, a collection information statement covering your income, expenses, and assets. The IRS uses that financial snapshot to set an affordable monthly amount.6Internal Revenue Service. Instructions for Form 9465 – Installment Agreement Request
When mailing forms, use the address printed on your LT39. Certified mail with a return receipt gives you a record of delivery if processing runs slow. The IRS generally responds to installment agreement requests within about 30 days.7Internal Revenue Service. What if I Have Requested an Installment Agreement
One benefit worth knowing about: once your installment agreement is in place and the underlying return was filed on time, the failure-to-pay penalty drops from 0.5% per month to 0.25% per month.2Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax Over a multi-year plan, that cut adds up.
If You Cannot Pay
First-Time Penalty Abatement
If this is the first time you have owed a penalty, ask about first-time penalty abatement before you pay. The IRS will remove failure-to-file, failure-to-pay, or failure-to-deposit penalties if you had no penalties in the prior three tax years and you filed all required returns for those years.8Internal Revenue Service. Administrative Penalty Relief Call the number on the LT39. If the representative approves it on the call, the penalty comes off right away. If they cannot, you can submit the request in writing on Form 843.9Internal Revenue Service. Penalty Relief Many people who qualify never ask.
Currently Not Collectible Status
If paying anything at all would keep you from covering basic living expenses, ask the IRS to place your account in Currently Not Collectible status. Active collection stops, though penalties and interest keep accruing and the balance keeps growing.10Internal Revenue Service. Temporarily Delay the Collection Process You will typically need to complete Form 433-F with documentation of income, expenses, and assets. The IRS reviews the account periodically to check whether your ability to pay has changed. A federal tax lien may still be filed while your account carries this status.
Offer in Compromise
An Offer in Compromise settles the debt for less than the full amount when the IRS agrees you cannot pay the balance in full within a reasonable time. The application requires a $205 fee and an initial payment: either 20% of your proposed settlement for a lump-sum offer, or the first monthly installment for a periodic-payment offer. Low-income taxpayers can have both waived.11Internal Revenue Service. Form 656 Booklet – Offer in Compromise
The IRS evaluates your offer against what it calls reasonable collection potential, essentially the equity in your assets plus a projection of your future income. Your offer needs to meet or exceed that number to have a real chance. You must also be current on all tax filings for the past six years and current on estimated tax payments. If the IRS accepts, you are locked into a five-year compliance commitment: any late filing or new balance due during that window reinstates the original full debt.
What Happens If You Ignore the LT39
Doing nothing is the most expensive path. Collection escalates in predictable steps, each harder to reverse than the last.
Federal Tax Lien
A federal tax lien attaches to everything you own once three conditions are met: the IRS assessed the tax, sent a notice demanding payment, and you did not pay within the required time. If you received the LT39, the first two conditions are already satisfied. The lien is a public record that hurts your credit, complicates property sales, and gives the IRS priority over other creditors. Under the Fresh Start program, you can request lien withdrawal if your balance is $25,000 or less.12Internal Revenue Service. Understanding a Federal Tax Lien
Levy and Seizure
The IRS can seize wages, bank accounts, and other property through a levy. Before it does, it must send a written notice of intent to levy at least 30 days in advance by certified or registered mail, personal delivery, or by leaving it at your home or workplace.13Office of the Law Revision Counsel. 26 USC 6331 – Levy and Distraint That notice also explains your right to a hearing. If you ignore it too, actual seizure follows.
Passport Denial or Revocation
If your total unpaid federal tax debt exceeds $66,000 (adjusted annually for inflation) and the IRS has filed a lien or issued a levy, the IRS can certify you to the State Department as seriously delinquent. The State Department can then deny, revoke, or limit your passport.14Internal Revenue Service. Revocation or Denial of Passport in Cases of Certain Unpaid Taxes Entering a payment plan or getting the account placed in Currently Not Collectible status can prevent or reverse that certification.
Your Right to Appeal Collection Actions
If the IRS files a lien or sends a final notice of intent to levy, you have 30 days from the date of that notice to request a Collection Due Process hearing by filing Form 12153. The hearing is conducted by the IRS Office of Appeals, which is independent of the collection division. A timely request also preserves your right to take the case to Tax Court if you disagree with the outcome.15Taxpayer Advocate Service. Collection Due Process Miss the 30-day window and you can still request an equivalent hearing within one year, but you lose the right to judicial review.
For actions that do not carry Collection Due Process rights, or when you want a faster resolution, the Collection Appeals Program covers disputes over liens, levies, seizures, and rejected or terminated installment agreements. You file Form 9423 to start the process.16Internal Revenue Service. Collection Appeal Request Decisions under this program are binding and cannot be challenged in court.
The 10-Year Collection Clock
The IRS does not have unlimited time. Under 26 U.S.C. ยง 6502, it generally has 10 years from the date of assessment to collect through a levy or court proceeding.17Office of the Law Revision Counsel. 26 USC 6502 – Collection After Assessment After that Collection Statute Expiration Date passes, the debt is legally unenforceable. Certain actions pause the clock, including bankruptcy, a pending Offer in Compromise, or an installment agreement that includes a written extension of the collection period. If you are close to the 10-year mark, agreeing to a payment plan that extends the collection window can cost more than letting the debt expire on its own. That is a situation where paid tax advice usually pays for itself.