The CP501 or CP 502 notices are the first indication that you have outstanding tax debt. Usually sent out five weeks after your bill, these notices may be titled You Have a Balance Due.
When you get one of these notice in the mail, it will explain the details of the situation, including:
- That your taxes are considered delinquent
- The dollar amount you owe to the IRS
- An outline of interest accrual on your debt
- The due date by which your tax debt must be paid
The CP501 is the less urgent of the two notices. It essentially outlines your outstanding tax debt, and urges you to pay it soon. If you fail to pay, you’ll receive a CP502, which is the same letter but slightly more urgent in encouraging you to pay.
Both notices will include your outstanding debt, interest rate, and due date, but the CP502 will show a higher payment amount since interest has accrued since the first notice was mailed.
When you receive one of these letters, you need to act soon to avoid further penalties. Your choices include:
- Pay the balance in full
- Set up an installment agreement
- Re-negotiate your debt
Paying the total amount is obviously the easiest way to get rid of your debt, but not everyone has the ability to do this. Many taxpayers set up a tax repayment plan, where they pay installments to the IRS until their debt is gone.
As for the third option, if you feel the amount you owe to the IRS is incorrect, you can file a dispute to have our amount re-considered.
Whichever option you choose, don’t wait to act. Get in touch with a certified tax professional who can help you weigh your options.