Received an IRS Notice CP503, What is Your Next Move?

Received an IRS Notice CP503, What is Your Next Move?

Did You Receive an IRS Notice CP503?

While there are many different types of notices that a taxpayer may receive when they either have not filed their taxes or have an outstanding tax liability or penalty that they did not pay — the CP503 notice is one of the most important. The CP503 notice is designed to update taxpayers that they still have an unpaid balance on their IRS account. While oftentimes it will be because the taxpayer has an outstanding tax liability that they have not paid, in recent years taxpayers have been receiving these notices because they have an international information reporting penalty that they have not yet paid, such as an assessed penalty for filing a late Form 3520 or Form 5471. Taxpayers may receive multiple CP503 notices over several months or years — which will ultimately culminate with either a notice of federal tax lien or a final notice of intent to levy. Let’s take a brief look at what the IRS provides about taxpayers receiving a CP 503 notice.

CP503 Frequently Asked Questions (FAQs)

These FAQs are reproduced from the IRS Website:

What is the notice telling me?

• • • “This notice is your second reminder that you still owe a balance on one of your tax accounts. You received this notice because we haven’t received your payment or a response to previous notice(s) requesting you pay this balance.”

What do I have to do?

• • • “Pay the amount you owe by the due date shown on the notice. You can quickly and easily pay your balance online or mail us your payment in the envelope we sent you. Please include the bottom part of the notice to make sure we correctly credit your account.

    • If you can’t pay the whole amount now, you may qualify for a payment plan (including installment agreements) by applying online through our Online Payment Agreement Application. You can also mail us an Installment Agreement Request.”

How much time do I have?

• • • “You must pay the entire balance by the due date shown on your notice to avoid additional penalties and interest.”

What happens if I don’t pay or respond to this notice?

• • • “If you don’t pay the amount due, make payment arrangements, or contact us at the toll-free number on your notice, we may file a Notice of Federal Tax Lien if we haven’t already done so. A tax lien is a public notice to your creditors that the IRS has a right to your interests in your current assets and any assets you acquire after we file the lien; it can affect your ability to get credit.”

Who should I contact?

• • • “If you have any questions about this notice, call us at the toll-free number shown on your notice by your payment due date to speak to a customer service representative.”

What if I don’t agree or have already taken corrective action?

• • • “If you don’t agree, contact us immediately to discuss your matter with a customer service representative. We’ll do our best to assist you.

    • If you have already taken corrective actions, you should still call us at the toll-free number shown on your notice to make sure your account accurately reflects the actions you’ve taken.”

What Should You Do Next?

Taxpayers should pause before communicating by telephone with the IRS If a taxpayer has received the CP503 notice they may have a few options available to them. Presuming that the taxpayer does not want to pay the amount due or disputes that amount, they may consider waiting until they receive a Letter 1058 or similar notice so that they can file a Collection Due Process Hearing Request. During the collection due process hearing, taxpayers will have an opportunity to challenge the penalty if they can show reasonable cause and potentially settle the matter — and even facilitate a collective settlement if multiple issues are outstanding. Otherwise, the taxpayer may potentially have the opportunity to challenge it in Tax Court or pay the penalty and sue the IRS in Federal Court.

Late Filing Penalties May Be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.