If you have received a CP501, you have an unpaid tax debt and are at the beginning of what could be a long process leading to steep penalties, interest, and even a lien or levy as long as the balance remains outstanding. Wiggam & Geer can help you respond to the IRS and find the best solution for your situation, including payment plans.
If you filed your tax return but didn’t pay your taxes, you will likely receive a CP501 from the IRS. The notice will come in the mail and include the tax year and filing form to which it pertains, as well as your taxpayer ID (Social Security number).
What Is a CP501 Notice?
A CP501 IRS tax notice is basically a bill from the IRS for unpaid taxes. This first notice from the IRS details the amount due, payment deadline, and available payment options. It also notes any penalties and interest assessed thus far. If you fail to pay the balance by the noted due date, additional interest and possibly penalties will accrue.
Regardless of whether you filed an IRS paper return or electronically submitted your tax return, the CP501 for unpaid taxes will always come in the mail. The IRS does not initiate contact via a phone call, email, or text message. If you have such a message claiming you owe a tax debt and warning of a CP501 notice, it is likely a scam. Do not respond. You can always directly call the IRS to confirm any contact.
How to Respond to a CP501
If you can pay the total amount due, the best course of action is to do so. You can mail your payment with the coupon or bottom part of the notice, or you can pay online.
If you cannot pay the balance right away, you can contact the IRS to set up a short- or long-term payment plan. Note that interest will continue to accrue, and additional penalties may apply, until the balance is fully paid.
You can also apply for an offer in compromise (OIC) to have your overall tax bill reduced if the debt is overwhelming and you have no way to pay it in the foreseeable future. The OIC requires application, and the IRS will review your earnings, expenses, assets, and ability to pay before granting your request. Only about 40% of OIC applications are approved each year.
What if I Disagree with the Amount Due on the CP501?
If you disagree with the amount of tax assessed by the IRS on the CP501 Notice, you can dispute it by contacting the agency. Your CP501 Notice will include a toll-free phone number to use, as well as a caller ID specifically assigned to your case. Be prepared to discuss the reasons you disagree, and have pertinent documentation, such as cancelled checks or a subsequently filed amended return, on hand.
What Happens if I Do Not Respond to the CP501?
If you do not pay the outstanding taxes, contact the IRS regarding a payment plan, or otherwise respond, the IRS will send you another notice, CP503 IRS Second Notice of Balance Due.
If you fail to respond to the CP503 second notice, the IRS’s next step will be to send a Notice of Federal Tax Lien. The lien notice alerts creditors that the IRS is going to put a lien on your assets. The lien secures the IRS’s interest in your property until you pay the taxes due, and the lien is withdrawn or discharged. If you sell the property with the lien still on it, the IRS receives an amount equal to the lien before you receive any proceeds.
If you have received an IRS CP501 notice, consider consulting one of our tax attorneys to discuss your options for paying or disputing the bill. If you need help with installment agreements or an offer in compromise, our team of experienced attorneys can explain the processes as well as help you to negotiate with the IRS. Give us a call today at (404) 233-9800 to get started.