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Keeping up with your tax obligations isn’t easy, as life costs continue to soar at historic rates. Still, the difference between owing taxes and neglecting your tax obligations is immense.
The IRS only sends Notice CP503 to taxpayers who ignore previous payment reminders and choose to do nothing about their tax debts.
Individual taxpayers receive two tax payment remainders before Notice CP503, Notice CP14, and Notice CP501. On the other hand, the IRS sends just one notice to businesses before sending Notice CP503.
The purpose of the notice is to remind you that you still have an outstanding balance on your account and to request payment by a specific date.
In this article, we’ll help you interpret and understand your tax payment reminder if you get IRS Notice CP503 in 2023.
Table of Contents
Understanding Tax Payment Reminder Notices
Let’s briefly explore how federal tax debts work before delving deeper into payment reminder notices.
Failing to file taxes, filing taxes after the deadline, or underpaying taxes are common ways taxpayers generate tax debts. The IRS adds interest and penalties to the amount owed, increasing taxpayers’ tax liability.
However, the agency doesn’t always try to collect debts in the same year and often waits several years before sending a statement on the balance due notice (Notice CP14).
So, the debt the IRS seeks to collect from you can be up to ten years old or even older if you didn’t file a tax return for a particular year.
The first tax payment reminder notice reveals the amount you owe, lists your payment options, and tells you what to do if you cannot pay the entire tax liability in a single payment.
The IRS will send you Notice CP501 if you don’t respond to Notice CP14, and four to six weeks later, you’ll get Notice CP503 if you ignore Notice CP501. Meanwhile, the interest and penalties will continue to inflate your tax liability at a galloping rate.
Although the IRS may place a lien on your property immediately after sending you Notice CP501, getting Notice CP503 doesn’t mean that the IRS intends to take collection action immediately.
Glancing Through IRS Notice CP503
The contents of CP501 and CP503 notices are similar because both letters serve as reminders for taxpayers who didn’t pay their tax debts.
Both notices urge you to pay the balance due before a certain date, usually 21 days after the notice date, or explore payment options if you cannot pay the entire amount.
Moreover, these notices are sent automatically to taxpayers who are already in the Automated Collection System.
The first page of Notice CP503 contains the taxpayer’s information, including the SSN and caller ID. You can find the notice date, IRS contact number, and tax year in the page’s upper right corner.
The notice will state that this is the second reminder the IRS sent you and indicate the amount you owe.
The reason you’re receiving this notice is that the IRS has already notified you that their records show you owe taxes for a particular tax year and informs you that penalties and interest will increase if you don’t pay the debt by the date indicated in the notice.
The Billing Summary section breaks down how much you owe, including penalties and interests assessed to your account.
The notice contains a stub you must send to the IRS after you acknowledge and pay the debt and instructions on how to pay the balance due online on the IRS website.
The remaining four pages provide information regarding the payment options, interest, penalties, and how to check your current balance. Please note that the penalty rates depend on several factors, including the amount you owe and when or if a tax return was filed.
Taxpayers owing over $100,000 have ten business days to pay the debt before their interest and penalties increase. On the other hand, taxpayers who owe under $100,000 have 21 days to pay the balance due before the IRS increases penalty and interest rates.
Responding to IRS Notice CP503
Like all previous tax payment reminders, Notice CP503 allows taxpayers to acknowledge and pay the debt or appeal the tax liability assessed to their account.
The IRS regards the failure to respond to this notice as an acceptance of tax liability. They retain the right to file the Notice of Federal Lien against you and continue charging interest and penalties at increased rates.
The penalty rate for the failure-to-pay penalty is ½% per month of the due amount, but this penalty can increase up to 25%.
1. Accepting the Tax Debt
Doing as instructed and following payment guidelines from Notice CP503 is the simplest way to stop your tax debt from increasing even further. The IRS lets you pay the tax liability schedule and modify or cancel payments from your online account on their website.
Optionally, you can mail the stub from Notice CP503 along with the proof of payment to the IRS. Taxpayers who cannot afford to settle the entire debt in a single payment can explore one of the options below:
- Obtaining hardship relief: The IRS lets you apply for the Currently Not Collectible status if you can provide substantial evidence that your current financial situation prevents you from settling the debt.
- Entering the installment agreement: If your tax debt is under $100,000, you can apply for an installment agreement online and repay the balance due in 72 months.
- Applying for an Offer in Compromise: The IRS might accept less than what you owe if you qualify for an offer in compromise. Still, it’s advisable to consult a tax attorney before filing an offer in a compromise application.
Taxpayers who think the IRS erroneously assessed penalties to their accounts can seek penalty abatement. The IRS might also waive the interest and penalty fees if they result from inaccurate written advice a taxpayer received from the IRS.
2. Appealing the Balance Due
Notice CP503 instructs taxpayers to contact the IRS if they disagree with the amount due indicated in the notice. The contact number is in the upper right corner of the notice’s first page.
The IRS sends Notice CP503 to taxpayers in its ACS, so the agent you’ll reach will most likely be unfamiliar with your case.
Moreover, appealing the balance due on Notice CP503 without a CPA or tax attorney might reduce your chances of resolving the tax dispute in your favor.
The Ramifications of Disregarding IRS Notice CP503
The IRS usually intensifies its collection efforts if taxpayers don’t respond to Notice CP503. You’ll receive the so-called Notice of Intent to Levy or Notice CP504 if you don’t pay the debt or set up a payment plan before the date indicated on Notice CP503.
Subsequently, the IRS will send you the Final Notice of Intent to Levy (Notice LT11) or Letter 1058 before initiating the debt collection procedure.
Depending on the amount due, the IRS might levy your bank account, garnish your Social Security or wages, or seize the property you own. Interest and penalty rates will continue to increase gradually, and your tax debt will grow if you disregard your outstanding tax liability.
The consequences of ignoring the second tax payment reminder can be disastrous, so you should respond to it promptly and take steps to pay the amount you owe.
Frequently Asked Questions
Taxpayers who didn’t have health insurance for one or more tax years before 2019 may still receive the shared responsibility notice or Notice CP503H in 2023. The IRS stopped assessing this penalty in 2019, but you must pay it if it was assessed to your account in previous years.
Contact the IRS and inform them that your account doesn’t show you paid the due balance after you completed an electronic payment. You may have to wait a few weeks for the payment to appear on your account if you opted for a money order or check payment option.
It would help if you continued making monthly payments under your current payment plan after the IRS sends you Notice CP503. It’s advisable to call the IRS and find out why they sent you the notice.
The IRS will send you and your spouse a copy of this notice if you file a joint return, but you don’t have to pay the amount due twice.
Managing Tax Debt After Receiving IRS Notice CP503
Ignoring IRS Notice CP503 is delaying the inevitable because you must address the issue sooner or later and pay the debt.
The best thing you can do is to take a proactive approach and start working with the IRS on settling the debt as soon as you get the second tax payment reminder, even if you cannot pay the entire amount you owe in a single payment.
You should only manage tax debt if you’re familiar with your rights as a taxpayer and tax laws. Go to choicetaxrelief.com or call 866-8000-TAX to schedule a free consultation with a tax professional who can help find the best tax relief option for you.
Author:
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.
