The CP501 or CP 502 notices are first and most common notices you receive when you have outstanding tax debt. Typically sent out 5 weeks after you receive your bill, these notices are part of the “500 series” of notices sent off by the IRS. It may be simply but boldly titled You Have a Balance Due.

When you get this notice in the mail, it will outlay the outstanding facts on our account such as:

  • The fact that your taxes are considered “delinquent” in their system
  • The dollar amount you owe to the IRS
  • An outline of interest accrual on your debt
  • The due date for when your tax debt must be paid

The difference between the CP501 and CP502 notices is the tone of each letter. A CP501 letter is a general statement outlining your outstanding tax debt, and that it should be paid soon. Failure to take action after receiving this letter results in receiving a CP502, which is the same letter with a stronger emphasis on paying your tax debt as soon as possible.

Like the CP501, the CP502 will list your outstanding debt, interest rate, and due date. However, the CP502 will show a higher payment amount as interest has accrued since the first notice was mailed.

Regardless of receiving a CP501 or CP502, it is imperative you take action immediately. The IRS will then give a list of steps that you can take to resolve your tax debt.

As listed on the notice, three options are given to taxpayers:

  1. Pay the balance in its entirety
  2. Set up a tax repayment plan
  3. Re-negotiate your amount owed

Paying the amount owed in full is the simplest way to resolving tax debt, but not everyone has the funds to pay it off in full. This is why it is very common for taxpayers to set up a tax repayment plan, where they pay a certain dollar amount in installments to the IRS until their debt is paid off.

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.

Bottom line: waiting until the last second to take care of tax debt will only hurt you. Whether you just received your CP501 or CP502, take action immediately to save yourself from greater penalties.