CP503 Notice: Second Reminder of Money You Owe to the IRS

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A CP503 Notice is a second reminder that you owe money to the IRS. You should have already received a CP14 or CP501 IRS notice stating that you have a tax balance due. A CP503 means that the IRS still has not received a response or payment and will soon take collections actions if you fail to respond.

You can view a sample CP503 notice here.

CP503 Notice vs. CP503H Notice

Most people who owe tax and didn’t respond to the first notice get a CP503 Notice. This is a general notice that you owe taxes.

If you owe money because of the Shared Responsibility Payment, the IRS sends a CP503H Notice instead.

What if I got a CP503 notice after I already paid?

The IRS takes time to process payments, update tax accounts, and send out notices. Receiving a CP503 may not mean they haven’t received a recent payment or that you still have unpaid taxes.

If you already paid in full or made other payment arrangements, you should call the IRS to confirm you don’t still have an unpaid balance.

What if I disagree with the amount owed on my CP503 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. Many tax pros offer a free consultation on this type of issue.

Form 9423 may be an option to stop collection activity if you belive the IRS didn’t follow the proper procedures or otherwise violated your rights under federal law.

What are my payment options?

You have several options to pay a tax debt.

  • 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 your unpaid taxes 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.

Remember that additional penalties and interest charges continue to accrue until you pay your tax bill in full. It’s similar to not paying a credit card.

The payoff amount shown on your IRS Notice CP503 is only good until the due date listed. If you didn’t pay by the due date, call the IRS toll-free number to get an updated balance.

You can minimize penalties and interest by paying as much as you can as soon as possible, even if you can’t make a full payment. If the tax debt is very old or you don’t think you’ll be able to pay it off, you may want to talk to a CPA firm before making any payments to determine what options you may have available.

Can you get the penalties waived?

It may be possible to have the penalties removed or reduced especially if you’ve had no recent tax problems. See IRS Penalty Relief for more information.

What if I don’t pay or take action?

The Internal Revenue Service has already sent at least two notices regarding your unpaid balance and is close to taking collection actions like issuing a notice of intent to 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 a federal tax lien placed on your home, have your wages garnished, or have money taken out of your bank account.

What is a federal tax lien?

Tax liens are a way for the IRS to put a claim on your house when you owe taxes. It’s kind of like a mortgage, except the IRS never agreed to give you a loan.

You won’t be able to sell your house unless you pay the balance you owe. A tax lien is a public record, so any potential buyer will know that you have to be able to pay the whole balance you owe the IRS at closing, or the buyer won’t get a clean title to your house.

In some cases, the IRS will foreclose on your house. That means they can force a sale with the proceeds going to pay the amount you owe the IRS.

Note: While there are many reasons you want to avoid a tax lien, they no longer affect your credit score with the three major credit bureaus.

Conclusion

A CP503 Notice is at least the third notice the IRS sends telling you that you have a tax debt. If you don’t immediately pay or respond, you could face collections actions. If you disagree with what you owe, contact the IRS or a tax professional as soon as possible.

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