If you owe past due taxes to the IRS, chances are you’re dreading that trip to the mailbox. Uncle Sam can and will issue a notice of taxes due. Time is on your side in the sense the IRS will issue several written notices before taking legal action against you in collecting any tax debt. At the same time, that doesn’t mean you can disregard any notices that are sent to you by the IRS. Here’s a look at the CP501, and CP502 notices.
A Not-So-Gentle Reminder
The CP501 is the first written statement you receive regarding your tax debt. By the time you receive this notice, your taxes are already past due, and the IRS is reaching out…just is case you forgot. On this letter, you’ll find the tax year(s), the amount you owe, the payment due date, and the suggested course of action for you to take to avoid further action from the IRS.
Additionally, you’ll also find a breakdown of the interest and penalties have accrued since the original due date for the taxes.
If At First They Don’t Succeed…
The IRS will undoubtedly try again, this time in the form of a CP502 notice. The language in this notice is stronger than in the CP501; you’ll be instructed to pay your tax balance immediately. As with the CP501, you’ll be advised of your total balance due, plus any interest and penalties that have accrued since the date of the first letter.
Course of Action
The IRS expects to see a serious effort on your part at this stage. You’ll be given three options:
- Set up an installment plan
- Pay the full balance owed, including any penalties and interest
- Dispute the balance due. If you disagree with the amount due or with the IRS’s decision, you can contact them at the phone number provided on the letter.
While these notices are written in less threatening language than later notices, it makes sense to take care of the matter early, either on your own or by enlisting in the expertise of a licensed tax advisor. If you ignore any correspondence from the IRS, they may see no alternative other than levying your assets in order to clear your tax bill.
If the thought of dealing with the IRS leaves you cold, contact a licensed tax pro as soon as possible to avoid any further interest, penalties and/or collection action. A qualified tax pro can represent you when dealing with the IRS. and can determine whether or not you qualify for programs such as an installment agreement or Offer In Compromise.
Receiving a notice from the IRS is never anyone’s idea of a good time. It’s imperative to understand notice, and what is being asked of you as the taxpayer. Ignoring CP501 and CP502 notices is never a good idea.
Gather all of your documentation, take a deep breath, and contact the IRS as soon as possible. If the thought of that makes you break out in a cold sweat, we have licensed and qualified tax pros on staff to help you sort your your options. Get started by clicking the white “Start Chat” button or by giving us a call.
After all, wouldn’t it be nice to not dread that walk to the mailbox each day?