September 8, 2023 | Tax Notices
Taxpayer’s Guide to the IRS CP503 Notice
IRS Notice CP503: Second Reminder of Unpaid Taxes
If you owe taxes, the IRS sends out numerous reminders and demands for payments. The CP503 notice is generally the second notice that the IRS sends, and it comes after the CP501. If you don’t respond to CP503, the IRS will send CP504, which gets much more severe.
Tired of IRS letters? Are you worried about what the IRS will do if you don’t pay? Ready to work out a solution? Then, contact us at the Timothy S. Hart Law Group today.
What Does IRS CP503 Mean?
CP503 means that you have unpaid taxes and you didn’t respond to the IRS’s other notices. This notice outlines your payment options. It explains what to do if you disagree with your balance and what will happen if you don’t pay.
What to Expect If You Receive CP503
Here’s what to expect if you receive this notice based on the steps that you take:
- You ignore the notice — The IRS sends at least one more notice before sending serious notices, such as the final intent to levy notice.
- You pay the balance due in full — The IRS clears your account, and if there were liens against you, the IRS discharges them.
- You contact the IRS about payment plans — As long as you meet the requirements, such as being up to date on your filing obligations, the IRS approves most payment plan requests if you owe less than $250,000. Remember, at this point, your account is still in the automated system. If you wait until it’s assigned to a revenue officer, it will be harder to get a payment plan without providing more financial information.
- You tell the IRS that you can’t afford to pay — The IRS will request financial information and then decide whether or not to put you on hardship status.
- You contact the IRS to disagree with the amount due — The IRS will tell you what you need to do to contest the tax due. You may need to fill out a lot of paperwork, provide backup information, or argue your interpretation of the tax law.
- You contact a tax attorney — The tax professional will help you find the best solution for your situation. They will help you decide if you should make monthly payments or apply for a settlement. They will also help you reduce penalties, dispute incorrect tax assessments, and deal with the IRS.
In almost all cases, the IRS will issue a federal tax lien (if it hasn’t done so already) if you owe more than $10,000. This may happen whether you ignore the notice or set up payments.
Payment Options If the IRS Sends CP503
If you receive notice CP503, you have several different payment options, and the IRS mentions payment plans and offers in compromises on the notice. Here is a more detailed breakdown of the options:
- Streamlined Installment Agreement — You make monthly payments for up to six years, usually available on assessed balances of $50,000 or less.
- Non-Streamlined Installment Agreement — You make monthly payments on the full balance until the Collection Statute Expiration Date (CSED), up to 10 years.
- Partial Payment Installment Agreement — You make monthly payments until the collection statute expiration date, up to 10 years. Then, the IRS writes off the remaining portion of the debt.
- Offer in Compromise — You offer a settlement to the IRS. The IRS reviews your financial situation and decides whether or not to settle your tax debt for less than you owe.
- Currently-Not-Collectible — This isn’t a payment plan. It’s an IRS relief option that allows you to prove that you can’t afford to pay, and the IRS suspends collection actions against you.
A tax professional can help you pick the best option for your situation. Unfortunately, individuals can’t always figure out the best option. In fact, an independent analysis of IRS payment plans indicates that about a quarter of people who set up a payment plan would have qualified for a partial payment installment agreement or an offer in compromise.
What If You Disagree With the Balance Due?
If you disagree with the tax bill, you need to contact the IRS. You can call them directly at (800) 829-0922 or the number printed on your notice. If you cannot come to an easy resolution, you may want to consult with a tax attorney.
The options vary, but you may need to appeal the tax debt, amend your tax return, apply for innocent spouse relief, request an offer in compromise based on doubt as to liability, file an identity theft report, or take another path.
Who Sent the CP503 Notice?
The IRS’s automated collection system (ACS) sends out this notice. However, don’t let that trick you into a false sense of security — just because this notice came from a computer doesn’t mean that it’s not serious. The IRS’s automated system can also file tax liens against you and start wage garnishments and other collection actions.
Do I Need to Worry?
At this point, the situation is not dire. The IRS will send you more notices before taking severe action against you. However, if you don’t do something, your tax debt will continue to grow. The IRS will add interest and penalties to your account.
How to Contact the IRS If You Receive CP503
If you receive notice CP503, you don’t necessarily have to call the IRS. If your assessed tax balance is less than $50,000, you can request a payment plan on the IRS’s website. If you owe more than that, you can request a payment plan through the mail, but it’s usually more efficient to just fill out Form 9465 and call the IRS with the information.
You can also file forms to request an offer in compromise. If you disagree with the amount due, you can call the number printed on the notice. Are you feeling intimidated about talking to the IRS? Then, hire a tax professional and have them deal with the IRS for you.
What If You Ignore Notice CP503?
If you ignore his notice, the IRS will assume you agree with the tax debt shown, and you may lose your chance to appeal. The IRS will continue to add interest and penalties to your account. The IRS will send more notices, and eventually, the IRS may send a notice of intent to levy and start the process of seizing your assets.
After sending this notice, the IRS will seize your tax refunds to cover your unpaid taxes. In very rare cases, such as fraud or threat of fleeing the country, the IRS may issue a jeopardy levy — this allows the agency to seize your assets without sending any additional notices.
What If You Can’t Afford to Pay?
If you cannot afford to pay anything, the IRS may let you go on currently uncollectible status. Also called hardship status, this gives you temporary relief from the IRS collection process. The IRS will only enforce collections if your financial situation improves.
To get hardship status, you need to share a lot of financial details with the IRS. If the IRS thinks that you can afford to pay, they will deny your request. Then, depending on the situation, you may need to set up payments, apply for an offer in compromise, or take a different route.
What If You Already Set Up an Installment Plan?
Sometimes, the IRS sends CP503 after you’ve set up an installment plan. In this case, you can basically ignore the notice as long as you agree with the amount due shown. To be on the safe side, double-check to make sure that you have been making payments on your installment plan. Also, check that this notice doesn’t relate to a different tax year. Then, continue making payments as outlined in your agreement.
How to Make a Payment When You Receive CP503
You can pay online on the IRS’s website. Otherwise, you can mail a check or money order using the pay stub attached to the notice. If you can’t pay in full, contact the IRS or a tax professional to help you make payment arrangements.
What If Your Account Is on Hardship Status?
If you’re on currently uncollectible status, the IRS won’t enforce collections against you, but it may still send you this notice. In this situation, you don’t have to do anything, but you may want to double-check that your status is still active. You can do this in your online IRS account.
Get Help With Unpaid Taxes
At the Tim S. Hart Law Group, we work closely with our clients to help them understand what’s happening and to resolve the situation in the best way possible. Want to deal with your tax debt and get back on track with the IRS? Then, contact us today.