IRS Notice CP501: Reminder of Unpaid Taxes

IRS Notice CP501 is a reminder that you owe money to the IRS. You should have already received a CP14 notice or other IRS notice stating that you have a balance due. A CP501 means that the IRS still has not received your payment and is getting closer to taking further collections action.

You can view a sample CP501 notice here.

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

What if I got a CP501 notice after I already paid?

The IRS takes time to process payments and send out notices, so receiving a CP501 may not mean they haven’t received a recent payment. If you already paid in full or made other payment arrangements, you should call the IRS to confirm your account status.

Why is the balance on my CP501 notice higher than on my previous notice?

A tax balance works like a late credit card balance. Additional penalties accrue as long as you have an outstanding balance.

You must pay the entire balance to stop additional penalties and interest.

What if I disagree with the amount owed on my CP501 notice?

If you disagree with the amount you owed, you should review the instructions for how to respond on your original notice or talk to a tax professional.

What are my payment options?

You have several options to pay the balance.

  • Pay now in full via check, direct deposit, or credit card.
  • Installment agreement (payment plan) directly with the IRS to pay off your back taxes with monthly payments.
  • Offer in compromise to pay less than the full amount when it would be impossible for you to pay in full now or in the future.
  • Currently not collectible if your current financial status leaves you unable to pay now but you may be able to pay in the future.

What if I don’t pay?

The IRS is already starting to lose patience. Well actually, they have no feelings, but you are getting closer to a federal tax lien or levy.

If you want the IRS to work with you, you need to make some sort of payment arrangement now. Otherwise, you may soon have your wages garnished, or have money taken out of your bank account.

You can also expect to receive a CP503 Notice in the near future.

What is the CP501 Notice deadline?

Check your notice for the date you need to pay by. The deadline is typically 21 days from the date of the letter. Due to reduced postal service mailing speeds, this may be less than 21 days from when you receive your notice.

If you don’t pay the unpaid balance or make payment arrangements by the date on the notice, the IRS will send additional taxpayer collection notices and you may face consequences such as consumer tax liens.

If you want to get help from a tax professional, you should contact one immediately. The deadline on your notice is to resolve the situation with the IRS not to contact a tax professional. It will usually take at least several business days for a tax professional to help you respond to a tax notice.

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