IRS CP501: Reminder of Balance Due – What Happens Next

IRS Notice CP501 is a demand for payment - the IRS wants you to set up payments on your unpaid taxes. If you ignore this notice, the IRS will add more interest and penalties to your account. The agency will also seize future tax refunds from the IRS or the state. However, at this point, you still have some time - the agency must send you additional notices before seizing assets or garnishing wages. 

To get help with your unpaid taxes, use TaxCure to find a local tax professional. Or, keep reading to learn more about this notice.

Key takeaways

• CP501 - You have unpaid taxes; make arrangements with the IRS.
• When it comes - This is typically the second collection notice. 
• What to expect - More interest and penalties, risk of wage garnishment or asset seizure after additional notices.
• How to respond - Contact the IRS to set up payments or apply for a settlement.
• What if you disagree - Contact the IRS ASAP if you disagree with the balance due or other details on the notice.

To get a sense of what the CP501 looks like, take a look at . Then, keep reading to see what you should do with this notice.

What Is IRS Notice CP501? 

CP501 is a demand for payment. It's usually the second notice taxpayers receive when they owe money to the IRS. The notice states how much you owe, including penalties and interest. It outlines how to respond in different scenarios and explains what happens if you ignore the letter. It also tells you how to contact the IRS. Here's a sample CP501 notice.

What Should You Do If You Receive CP501?

The main options are to pay in full, contact the IRS for payment arrangements, or dispute the notice.  You can also ignore this notice if you've already paid in full or in certain other situations. Here are more details on each of those options:

Pay in full

If you can afford to pay the entire balance, merely detach the payment stub, write a check or money order to the United States Treasury, and mail the payment to the address on the notice. Make sure to put your Social Security number, the tax year, and the tax form you filed on the check. You can also pay online. The new notices for CP501, which started going out in November 2023, now have a QR code that you can scan and make a payment right from your phone.

Make payment arrangements or apply for relief

If you can’t pay the balance in full, contact the IRS immediately to discuss other options. Here are the main payment and relief options:

• IRS Installment Agreement: An installment agreement lets you pay off your taxes in manageable monthly payments. There are a few different types of installment agreements, but if you owe under $50,000, you can generally set up payments online.
• IRS Hardship: If you can prove that paying the tax would cause financial hardship, the IRS will put a temporary stop to all collection activity. This agreement is called an IRS hardship, uncollectible, currently not collectible (CNC), or status 53. Mostly, you have to show the IRS that you can’t afford to cover the tax owed and your essential living expenses.
• Offer in Compromise: With an offer in compromise, you settle the taxes owed for less than the total balance. You have to meet strict income and asset requirements to qualify for this arrangement. Consider working with a professional, as most offer-in-compromise applications are rejected by the IRS.

In addition to the ideas above, you should request penalty abatement. The IRS often waives penalties if taxpayers have a history of compliance or if they had reasonable cause for paying the tax late.

Dispute the tax due or other errors

If you disagree with the tax due, the penalties assessed, or any other information on the notice, contact the IRS directly at the number provided on the form. When you speak to an IRS agent, they will let you know your options. Contact a tax resolution specialist to help you if you want assistance in dealing with the IRS - an experienced tax pro is critical if you want to dispute the amount owed.

Ignore the notice

If you receive a CP501 notice and any of the following are true, you can disregard it:

• You have paid your balance in full in the last 21 days.
• You are already making payments on that tax amount through an installment agreement.
• You're on currently not collectible (CNC) status, and the IRS has suspended collections against you.
• You are in the midst of filing bankruptcy, and a stay has been issued to your creditors.

However, to be on the safe side, you should check your IRS account and make sure that the IRS received your payment, your installment agreement or CNC status is still active, or that the IRS has been notified about your bankruptcy case.

What If You Ignore Notice CP501?

If you ignore this notice because you've already paid in full or already set up payments, nothing will happen. Again, however, in those situations, you may want to contact the IRS to make sure they got your payment. If you ignore this notice and you haven't made arrangements for your tax debt, here's what can happen:

• Additional collection notices - The IRS will typically send the CP503 notice about six weeks later. If you ignore that notice, the agency will continue the collection process as follows.
• Refund offset - If you file a federal or state tax return showing a refund, the IRS can seize the refund. The agency may send a CP504 about the refund offset, but the agency doesn't need to give you advance warning.
• Loss of passport - The IRS can take your passport if you have a seriously delinquent tax debt - $65,000 or over as of 2025. Typically, the agency sends CP504B about this.
• Tax levies - The IRS can eventually freeze your bank account, garnish your wages, or seize physical assets if you don't pay your taxes, but they must first send you a Final Notice of Intent to Levy.

When you don't pay taxes, the IRS can issue tax liens that attach to all of your assets, and the agency can go after assets more easily and more extremely than almost any other creditors. Additionally, interest and penalties will continue to accrue on your account.

 If you try to sell or transfer assets, the lien will appear on the title search and complicate the asset transfer. Generally, you will not be able to get the proceeds from any asset sales - instead, the proceeds will be sent to the IRS before the title can transfer.

When Is the Due Date for Notice CP501?

Generally, payment is due within 21 days of the notice issue date, but if your balance is over $100,000, it is due within ten days. The due date is near the bottom of the first page on the detachable payment stub.

What Are the Penalties for Ignoring Notice CP501?

If you don’t pay, the IRS will continue to assess interest and the failure to pay penalty on your account. The penalty is 1/2% of your total balance every month, up to a total of 25% of the balance. For instance, if you owe $10,000, the monthly penalty is $50, and the IRS can add penalties worth up to $2,500. Interest accrues on top of these penalties. Eventually, your failure-to-pay penalty can increase to 1% of your balance per month. For instance, if you owe $10,000, your monthly penalty rises to $100. 

How to Get Help With Unpaid Taxes

To get help, reach out to a tax professional on our site who has IRS experience. You can find them here.