CP503: IRS Second Notice of Balance Due – Meaning & Actions Needed

If you owe tax to the IRS, the CP503 is usually the third notice an individual receives. If your business entity owes taxes, the IRS will send this letter as the second notice of four. The letter lets you know the tax balance owed. Furthermore, it outlines payment options and warns of actions the IRS may take if you do not pay. Ideally, you should pay off your balance as soon as possible or make payment arrangements to stop collection activity and minimize penalties and interest on your account.

Here is an example of a CP503.

What To Do If You Can Pay

If you can afford to pay your taxes in full, send a check to the address on the CP503 notice. Make sure to include the payment stub from the letter and note your identifying details (social security number, tax year, and tax form submitted) on the check. Alternatively, you can make a payment online. Setting up an automatic withdraw or electronic check from your bank account is usually free, but there is a fee if you want to pay with a credit card.

What To Do If You Can’t Pay

If you can’t afford to pay the whole balance by the due date on the notice, contact the IRS directly or get help from a tax professional. You may be able to make monthly payments through an installment agreement, have the balance reduced with an offer in compromise, or stop collection activity by securing hardship status. Depending on your situation, you may also be able to get penalties waived. To get the best deal possible, you should work with a tax professional. They know how to negotiate with the IRS to get you the payment plan or relief option that’s best for your situation.

What If You Don’t Agree With Notice CP503

Contact the IRS at the phone number listed on the notice if you think it’s been sent in error. Usually, by the time you get this notice, you should have received numerous other warning letters from the IRS. In most cases, if there was an error with an amount due or other details, taxpayers notice that before receiving this particular notice. If the IRS notice is incorrect and you already made a payment, make sure to contact the IRS as quickly as possible. It is essential to ensure the IRS credits your payment to the right account.

What Happens If You Don’t Pay

You should never ignore a notice from the IRS. If you don’t pay the balance within ten days, the IRS will add more interest and penalties to your account. Additionally, if you ignore Notice CP503, the IRS may issue a Federal Tax Lien in your name. Essentially, a tax lien is a formal announcement to your creditors that the IRS has a right to stake a claim to your assets. Traditionally, the tax lien appears on your credit report. However, as of 2018, all three major credit bureaus have removed tax liens from consumers’ reports.

The agency may also start looking for assets to levy (take). Typically, you will receive another formal notice of intent to levy before the IRS begins to levy your asset. However, to protect your assets, you should try to make arrangements before that happens.

What Is Notice CP503H?

Similar to the traditional CP503, Notice CP503H also lets you know that you owe taxes to the IRS. But this notice is focused on your shared responsibility payment (SRP) account. The SRP is the amount you owe if you don’t have minimum health insurance coverage for yourself or your dependents. Usually, this is not the first notice you receive. The IRS tends to send CP503H after sending several other notices.

You can make a payment in full by writing a check and returning the pay stub at the bottom of the form. You can also contact the IRS to set up a payment plan. If you don’t make full payment within ten days, the IRS may add interest to your balance. Under federal law, the IRS cannot issue a lien for this part of your tax liability. The IRS also cannot levy your assets for SRP. However, the IRS may keep federal, state, or local tax refunds and apply those amounts to your SRP tax bill.

How to Get Help If You Receive Notice CP503 or CP503H

To get help if you receive Notice CP503 or CP503H, contact the number at the top of the page or use our site and reach out to a licensed tax professional who has experience resolving IRS issues. They will start with a free consultation. Then, they will advise you of the best steps to take in your situation. Additionally, they can help you set up a payment plan, review your eligibility for a settlement or make other arrangements with the IRS and state taxation authorities.