IRS Notice CP501: What It Means and What to Do

Why did I get a CP501?

Common reasons include:

• An earlier balance-due notice (usually a CP14) was not paid in full
• You didn't respond to the earlier notice
• A payment was sent but not yet posted, or was applied to a different tax year
• Penalties and interest added to a balance that was already there

What should I do?

1. Read the notice carefully. It explains how much you owe, when payment is due and your payment options.
2. Check the balance against your records, and confirm any payments in your IRS Online Account.
3. Pay the amount you owe by the due date shown, online or by mail with the bottom part of the notice.
4. If you can't pay in full, apply for a payment plan through the online payment agreement tool or with Form 9465.
5. If you disagree, call the toll-free number on your notice right away and have your supporting paperwork ready.
6. If you want to contest a proposed collection action, follow the Collection Appeals Program instructions on your notice before the action takes place.

What documents do I need?

• The CP501 notice and the earlier notice (such as CP14)
• Proof of any payments, such as bank statements or cancelled checks
• Your filed tax return for the year shown
• Any amended return or correspondence you have sent the IRS
• Any installment agreement confirmation, if you already set one up

What should I avoid?

• Don't ignore this reminder. The IRS says it can file a notice of federal tax lien if you don't pay, make arrangements or contact it.
• Don't wait past the due date to call if you can't pay in full. The IRS says to contact it by the payment due date.
• Don't send the payment without the bottom part of the notice. It helps the IRS credit your account correctly.

What if I disagree with a CP501?

Call the IRS right away at the toll-free number on your notice, with supporting paperwork such as cancelled checks or an amended return. If you need to correct your return, file Form 1040-X. You may also ask for an appeal under the Collection Appeals Program (CAP, Form 9423) before collection action takes place, following the instructions on your notice. The IRS sample CP501 says to do this within 30 days from the date of the notice. Publication 1660 explains CAP.

What happens if I ignore a CP501?

If you don't pay, make arrangements or contact the IRS, it can file a notice of federal tax lien. A lien is a public claim against your current and future assets, and it may affect your ability to get credit. Interest keeps accruing, a failure-to-pay penalty applies, and the account generally moves on to further notices such as CP503 and CP504.

What else should I know about CP501?

A CP501 is usually the first reminder after the original bill, and it is the first point where the IRS page mentions a notice of federal tax lien. The IRS sample CP501 says the IRS can file a lien, or levy subject to any Collection Due Process rights, if the balance isn't paid. It also says you can ask for a Collection Appeals Program review before the lien is filed, by calling or sending Form 9423 within 30 days from the notice date. This CAP right is separate from the Collection Due Process hearing that comes later with a final levy notice. The sample also says to disregard the notice if you paid in full within the last 21 days or already set up payment arrangements.