Have you received a CP501 notice from the IRS? This notice is a reminder that you need to take action regarding an outstanding tax balance.
It’s never fun to receive a bill from the IRS, but just remember: You have options. If you can’t pay the balance in full, you can make a payment plan or delay collections. You might even be able to negotiate with the IRS and pay significantly less than you owe.
The most important thing is to act quickly. The CP501 notice is a gentle reminder to pay your tax debt, but eventually, the IRS can and will move on to more severe measures. The attorneys at Gordon Law have helped hundreds of clients resolve their tax debt, and we’re here to explain what you should do if you’ve received IRS Notice CP501.
What is IRS Notice CP501?
IRS Notice CP501 is a reminder that you owe money to the IRS. (You may see CP501 referred to as the “1st Notice,” but it’s actually the first reminder.)
It details what you owe, which includes IRS penalties and interest on top of your tax. It includes instructions for how to pay or what to do if you disagree with the information.
CP501 Deadline:
- If you owe less than $100,000, the deadline to respond to IRS CP501 is 21 days.
- If you owe $100,000 or more, the deadline is 10 days.
Why did I receive a CP501 notice?
A CP501 notice means you owe money to the IRS. This notice is a reminder following IRS Notice CP14, IRS Notice CP2000, or one of several other initial letters; it means the IRS did not receive your payment by the deadline or did not receive a response to the first notice.
The IRS can also make mistakes when sending these notices. If you think your notice was sent in error, call the toll-free number listed on the notice to speak to the IRS.
What if I already paid the amount on the CP501 notice?
The CP501 letter states, “If you’ve already paid your balance in full within the past 14 days or made payment arrangements, please disregard this notice.” It can take the IRS a few days, or even a few weeks, to catch up with processing your payment.
What to do if you receive a CP501 notice
If you receive this notice in the mail, you should either pay the balance, respond to the IRS, or contact a tax professional for help as soon as possible.
You have either 10 days or 21 days to respond. After this, the IRS will only send one more reminder before starting collection activity.
Save the notice
IRS Notice CP501 contains important information, like how much you owe, instructions for what to do next, the deadline to respond, and the correct contact information for the IRS. Whether you decide to deal with the tax debt on your own or hire a professional, it’s helpful to keep a copy of all IRS notices you receive.
Verify the information
The “Billing” section of the CP501 notice breaks down how much you owe, including tax, penalties, and interest. Make sure the amount of tax matches what you filed.
If you agree with the notice:
If you agree with the information on the notice, all you have to do is pay what you owe by the deadline. You can make this payment online at irs.gov/payments or mail a check using the instructions listed on IRS Notice CP501.
If you can’t pay in full right now:
If you’ve received IRS Notice CP501 and you can’t pay the full balance right away, you have options! The sooner you act, the easier it is to resolve your tax debt with manageable payments. In the right circumstances, you may be able to significantly reduce your tax debt or even eliminate it completely.
- Explore an Offer in Compromise: See if you qualify for reduced tax debt using an IRS Offer in Compromise. At Gordon Law, we’ve helped clients eliminate millions in tax debt using this method! Keep in mind that the program requirements are strict—in 2023, the IRS accepted only 42% of offers. An experienced IRS settlement attorney can help increase your chances of success.
- Pause collections due to financial hardship: You may qualify for Currently Non Collectible (CNC) status due to financial hardship. While you have CNC status, you’ll still accrue penalties and interest, but the IRS won’t issue a lien or levy against you. To qualify, you’ll have to prove that you can’t afford to pay your IRS bill and your basic living expenses at the same time.
- Set up a payment plan: The IRS offers installment agreements that allow you to pay over time, often up to 72 months (6 years). For tax debts under $100,000 you can apply for a payment plan online. However, it’s wise to consult a tax attorney to make sure you understand all your options.
- Call a tax debt lawyer: Many people facing tax debt are unaware of how many options they have, so it never hurts to schedule a free consultation with an attorney. Only an experienced tax debt lawyer can make sure you’re not missing out on any opportunities to reduce what you owe. If your tax debt is more than $20,000, call Gordon Law at (847) 580-1279 for a free attorney consultation.
Pro Tip: Beware of tax debt lawyers making promises that sound too good to be true. Many unscrupulous firms try to take advantage of your fear to sell services you don’t really need or don’t qualify for.
While it is possible to significantly reduce your tax debt—one of our clients recently eliminated more than $800,000 of debt using an Offer in Compromise—not everyone qualifies for such results. At Gordon Law, we pride ourselves on giving clear, honest guidance to help you get back on your feet.
How to dispute a CP501 notice:
If you disagree with the amount listed on IRS Notice CP501, make sure you respond by the deadline. If you ignore the notice, the issue won’t go away, but you’ll reduce the amount of options you have to resolve the dispute. Here’s what you can do:
- Call the IRS using the phone number on your notice: The first step is to call the IRS; use the phone number listed on your notice. Be sure to collect any documentation that supports your claim. Also, make sure you block out plenty of time, since you may spend a long time on hold.
- Call the IRS Taxpayer Advocate Service: For tax debts under $20,000, contact the IRS Taxpayer Advocate Service. This is a free service operated by an independent branch of the IRS.
- Hire a tax attorney: If your tax debt is over $20,000, reach out to a knowledgeable tax debt lawyer ASAP. An attorney can help you understand all your options, deal with the IRS on your behalf, and, in the right circumstances, settle for less than you owe. Reach out today for your free consultation.
What happens next?
Following the CP501 notice, the IRS will send a CP503 notice—the second reminder that you have a balance due. After that, it’s “no more Mr. Nice Guy.”
If you still don’t respond or submit payment, the IRS will move on to the CP504 notice, letting you know that they intend to seize your next state tax refund. But that’s not the end of it. The IRS can issue a tax lien against your home or car; issue a tax levy against your bank account; or begin wage garnishment for unpaid taxes.
With each successive step, it becomes more difficult to resolve your IRS debt favorably. Once the IRS issues a lien or levy, the only way to make it go away is to pay in full.
That’s why it’s important to respond to the earlier notices, like CP501, on time. At this stage, you still have time to negotiate with the IRS, attempt to reduce tax penalties, and potentially settle your tax debt for pennies on the dollar.
If you have any questions about this notice or how to make your tax debt go away for good, don’t hesitate to contact our experienced tax debt lawyers. The consultation is completely free!
Get rid of tax debt once and for all
IRS debt can feel stressful and overwhelming, but you don’t have to face it alone. If you’re getting IRS payment notices in the mail, Gordon Law is here to help. Our attorneys have years of experience fighting IRS debt, and many of our clients have saved $100,000 or more! We’ll provide a clear path forward and take care of every last detail.
Let’s put an end to this stressful situation so you can begin a new chapter. The first step is simple: Book a free consultation with an experienced tax debt lawyer by calling (847) 580-1279.
