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Understanding Your CP-501 Notice

Updated: Jan 21, 2021

Understanding Your CP-501 Notice

What is this notice about?

It explains that you have a balance due (money you owe the IRS) on one of your tax accounts. This may be a personal or business account that you are responsible for. The Prescott Law Firm assist taxpayers who have received these notices.

What do you need to do?

  • Read your notice carefully. It explains your due date, amount due, and payment options.

  • If you agree with the amount due and you can afford to do so make your payment by the due date on the notice.

  • If you disagree, contact The Prescott Law Firm Immediately immediately.

  • If you cannot afford to make the payments contact the Prescott Law Firm immediately. You may be able to set up a payment plan or the amount due can be negotiated with the IRS.

Frequently asked questions

What happens if I don't respond to this notice?

If you don't pay the amount due or make payment arrangements, the IRS can file a Notice of Federal Tax Lien on your property at any time, if they haven't already done so. In addition, if you don't pay the amount you owe by the due date on the notice, interest will increase and additional penalties may apply.

If the lien is in place, you may find it difficult to sell or borrow against your property. The tax lien would also appear on your credit report ― which may harm your credit rating ― and your creditors would also be publicly notified that the IRS has priority to seize your property.

Am I charged interest on the money I owe?

The IRS will continue to charge interest on any outstanding balance until the amount is paid in full. See the Penalties section that starts on page 2 of the notice.

Will I receive a penalty if I can't pay the full amount?

Yes, you'll receive a late payment penalty. The failure to pay penalty continues to accrue until the amount you owe is paid in full. Contact the Prescott Law Firm by the due date of your payment and, depending on your situation, it may be possible to remove the penalty.

What if I need to make a correction to my tax return?

The Prescott Law Firm can help you file an amended return.

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