What Is an LT38 Notice?
An LT38 is a collection reminder notice from the Internal Revenue Service informing you that you have an outstanding tax balance on your account and that the IRS is returning to active collection pursuit of that balance. The LT38 is not the beginning of a collection process — it is a resumption of one that was previously paused or interrupted.
The notice became widely issued beginning in 2024 when the IRS restored full automated collection operations following an extended pause. During the COVID-19 pandemic and the subsequent years of processing backlogs, the IRS suspended many automated collection notices for millions of taxpayer accounts. When the IRS worked through those backlogs and restored normal operations, it issued LT38 notices as the re-entry point for accounts that had been inactive during the interruption.
The LT38 arrives on IRS letterhead and will include your name, address, Social Security number, the tax years with outstanding balances, the current total amount owed including all penalties and interest accrued through the notice date, payment options, and a phone number to call with questions.
Why Did You Receive an LT38?
The LT38 is issued to taxpayers whose accounts had an unresolved balance at the time collection was paused, and whose accounts remained unresolved when the IRS resumed normal operations. The notice signals that the account has been reactivated in the IRS's collection system and that the standard notice sequence will now proceed toward enforcement if the balance is not addressed.
You knew about the balance but it was not being actively pursued. The most common scenario: you were aware you owed a balance, collection notices had stopped arriving, and — reasonably but incorrectly — you assumed the situation had stabilized or the IRS had deprioritized your account. The LT38 is the IRS saying: we have not forgotten, and we are resuming.
You were not aware the balance existed. In some cases, the original balance was created through an IRS adjustment or assessment that was mailed to a prior address. The collection pause then interrupted the process before you were successfully notified. The LT38 may be the first notice you physically receive about a debt that has been on your account for years.
A prior arrangement ended during the pause. If you had an installment agreement that ended — either because the balance was paid off, because the agreement defaulted, or because the agreed term expired — and a residual balance remained when collection was paused, the LT38 signals the resumption of collection on that remainder.
An OIC was rejected and collection resumed. When an Offer in Compromise application is filed, the IRS pauses collection during the evaluation period. If the OIC was ultimately rejected — either because it was returned without processing, withdrawn, or formally declined — collection resumes from where it stopped. The LT38 may be the first notice after that resumption.
What Happened to Your Balance During the Quiet Period?
This is the detail that surprises most LT38 recipients. The IRS's pause in collection notices was exactly that — a pause in notices. It was not a pause in interest or penalties.
During the entire period in which the IRS sent no collection correspondence, two things continued uninterrupted on your account:
Interest accrued daily at the federal short-term rate plus 3 percentage points. In recent years, with elevated short-term rates, this has been approximately 8% annually on an annualized basis — compounding daily on the unpaid balance.
Failure-to-pay penalty continued to accrue at 0.5% of the unpaid balance per month, up to the statutory maximum of 25% of the original assessed balance.
A $5,000 balance that existed when collection activity paused in 2020 may have grown to $7,500 or more by the time the LT38 arrives in 2024 or 2025 — an increase of 50% or more from interest and penalties alone, without any additional tax being assessed. The LT38 will show the current balance, which includes all of this accumulation.
For taxpayers who did not know the balance existed, seeing the current balance on an LT38 can be particularly jarring. The combination of the original amount, years of interest, and the full failure-to-pay penalty accrual — potentially at the 25% maximum — produces a total that may be significantly larger than any prior notice they received.
What Is Physically on the LT38?
A balance summary by tax year. Each year with an outstanding balance is listed with the current amount owed for that year, including penalties and interest accrued through the notice date.
The total outstanding balance. The aggregate across all years.
Payment options. Instructions for paying in full (online, by check, or by phone), setting up a payment plan, or calling the IRS to discuss options.
A contact number. The IRS phone number for questions about the notice or the account.
Taxpayer rights information. A summary of collection rights under the Taxpayer Bill of Rights.
The LT38 does not include a specific deadline in the same way that an audit notice does. However, the notice signals the start of resumed collection activity, meaning the subsequent notice sequence — which can culminate in levy action — will begin if the balance is not addressed.
Where the LT38 Fits in the Collection Sequence
The LT38 is not a standard step in the normal IRS collection sequence. It is more accurately described as a reset or re-entry notice — the mechanism the IRS uses to bring a dormant account back into active collection without simply jumping to enforcement.
After the LT38, if no action is taken, the IRS will proceed with the collection sequence that follows wherever the account was in the sequence when collection was paused. In most cases, this means:
CP504 — Notice of Intent to Levy — allows the IRS to begin levying state tax refunds and signals that levy action is imminent
LT11 / Letter 1058 — Final Notice of Intent to Levy — the formal legal notice that starts the 30-day window before the IRS can begin levying wages, bank accounts, and other assets
LT16 — Contact Required or Collection Begins — in some cases the LT38 is followed by an LT16 before the Final Notice
The LT38 is the earliest and least adversarial point in the resumed sequence. Addressing the balance at the LT38 stage — before CP504 and the Final Notice — preserves the widest range of resolution options and gives the most time to establish a sustainable arrangement.
What Future Refunds Face
One of the immediate practical consequences of receiving an LT38 is the impact on future tax refunds. As long as any unpaid assessed balance remains on your account, the IRS will intercept any federal tax refund through the Treasury Offset Program — before any amount is sent to you. This applies to the upcoming tax filing season and every subsequent year until the balance is fully resolved.
In most states, state tax refunds are also subject to federal tax debt offsets. If you are expecting a state refund and have an outstanding federal balance, the state refund may be intercepted as well.
Setting up a payment plan, establishing hardship status, or resolving the balance through another program does not typically protect future refunds from offset. Installment agreements pause levy action but do not prevent refund offsets.
Who Receives LT38 Most Often?
Taxpayers who knew about a prior balance and assumed the IRS had stopped pursuing it. The most common profile: a balance existed, notices stopped arriving during the pandemic, and the taxpayer concluded the matter had been deprioritized. The LT38 ends that conclusion.
Taxpayers who lost track of a prior balance due to moves or life changes. The combination of an old address and a multi-year collection pause creates a situation where someone may genuinely not know a balance exists until the LT38 arrives.
Self-employed taxpayers with balances from the pandemic period. The pandemic disrupted many small business and self-employment income patterns, creating balance situations that were never fully resolved before the collection pause began.
Taxpayers who had prior arrangements that ended without full resolution. An installment agreement that ran its term without fully paying the balance, an OIC that was rejected, a period of CNC status that ended — these situations commonly lead to LT38 notices when collection resumes.
Related IRS Notices
- CP14 — Balance Due Notice — the standard beginning of the IRS collection sequence
- CP504 — Notice of Intent to Levy — the escalation step that follows LT38 if the balance is not addressed
- LT16 — Contact Required or Collection Begins — a more urgent collection notice that may follow LT38
Frequently Asked Questions
Does receiving an LT38 mean the IRS is about to garnish my wages?
Not immediately. The LT38 is an early resumption notice — it signals that collection is restarting, not that enforcement is beginning today. Wage garnishment requires the IRS to issue the Final Notice of Intent to Levy (LT11 or Letter 1058) and then wait 30 days. The LT38 is multiple steps before that point. However, the sequence will progress toward levy action if the balance is not addressed.
I thought I had resolved this balance — why did I receive an LT38?
If you believe a prior balance was fully resolved, gather documentation: payment confirmations, a letter from the IRS acknowledging the resolution, or an IRS transcript showing a zero balance for the years referenced. If the resolution was legitimate and documented, you can contact the IRS to have the LT38 withdrawn based on that documentation.
Can I dispute the balance shown on the LT38?
Yes. If you believe the balance is incorrect — a payment was not credited, the assessment itself was wrong, or the penalties were improperly calculated — you can dispute it. Request your IRS account transcript to see the detailed history of each assessment, payment, and penalty. Identify the specific discrepancy, document it, and contact the IRS with that documentation.
What if the balance on the LT38 is more than I remember owing?
This is expected. The current balance reflects years of accumulated interest and penalties since the original assessment. Even a short period of non-payment results in meaningful balance growth from daily compound interest and monthly failure-to-pay penalties. The balance shown on the LT38 is the amount currently owed — not the original assessed amount.
How long before the IRS issues the Final Notice of Intent to Levy after an LT38?
There is no fixed timeline, but the IRS typically progresses through the remaining collection sequence — which may include a CP504 and an LT16 before the Final Notice — over a period of weeks to a few months. Acting early after receiving the LT38 gives you the most time and the most options.
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If you received an LT38 and want to understand where your account stands and which resolution programs you may qualify for, the FreshStartGuide eligibility tool can help.