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IRS is resuming issuance of tax balance-due notices

October 25, 2020
Mail bins_USPS OIG report

Photo via Office of the U.S. Postal Service Inspector General

One of the downsides of the Internal Revenue Service closing most of its offices earlier this year as a COVID-19 precaution was that taxpayer returns piled up. And it was a huge pile of mail, estimated at one point to be more than 12 million pieces.

Some of that snail mail stack included tax payments. But since they weren't recorded, the compliant taxpayers still got automated tax-due notices.

To the agency's credit, when it realized it was sending out erroneous notices demanding already delivered money, it stopped.

But now, the IRS says it's made enough of a dent in the mail morass to account for timely mailed payments. So it's time to get back to the collecting part of its job.

IRS again telling taxpayers they owe: The IRS will resume sending out 500 series notices that alert taxpayers they owe in late October, which is now, or early November.

The 500 series includes three notices that are issued at varying stages of nonpayment:

  • CP501 — This initial payment notice says the IRS is still waiting for your overdue tax money.
  • CP503 — This follow-up notice is sent when you don't respond to the first payment demand and warns that you may be subject to a lien if you don't pay.
  • CP504 — Things are getting more serious by the time you get this notice, which warns that levy action on any state income tax refund you might have is imminent.

These notices typically are sent to taxpayers who first received a CP14, which is the initial balance notice sent to those who owe. It's the IRS' nicest way of saying pay, or prove that you don't owe. Ignoring it will shift your tax account to the 500-notice cycle.

The CP501, CP503 and CP504 notices also are this week's featured By the Numbers figures.

Don't ignore any IRS notices: If you owe and get any of these notices, the key is to take action. Call your tax adviser or touch base with the IRS.

If you can't afford to pay your full tax bill, you need to at least let the IRS know that you know you owe and are trying to do something.

Pay whatever amount you can afford. Then make arrangements to pay the rest through an installment plan. My earlier post, Options to deal with tax bills that many worry they can't pay, looks at the various alternative tax payment possibilities.

But again, the key is don't ignore any IRS notice, especially not ones demanding payments. That's a sure way to end up in even more tax trouble.

You also might find these items of interest:

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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