The Internal Revenue Service said Friday it would restart issuing its 500 series of balance-due notices to taxpayers later this month after they were paused on May 9 due to the COVID-19 pandemic.
While the IRS continued to issue most of its notices, the 500 series was temporarily suspended because of a backlog of mail that built up at the IRS while many employees were away from agency facilities due to COVID-19. The IRS came under fire earlier this year for issuing balance due notices with the incorrect dates to taxpayers during the pandemic and agreed to stop sending the notices until it caught up with its backlog of unopened mail (see story).
Sarah Rafie is an associate at Bracewel
Britt Steckman is a senior associate at Bracewell.
Paul is a partner in the Washington, D.C. office of Bracewell.� Paul’s career has intertwined with the SEC’s regulation of the municipal market from the very beginning, when as a young lawyer in the SEC’s Division of Enforcement he participated in preparing the SEC’s September 1977 and 1979 Staff Reports on New York City.� After practice as a securities, project finance, and bond lawyer in New York and Boston, �Paul returned to the SEC in 1994 to work for Chairman Levitt and serve as the first Director of the SEC’s Office of Municipal Securities. During that time, he participated in drafting the continuing disclosure amendments to Rule 15c2-12, oversaw SEC activity relating to Orange County California and advised the Commission on institution and settlement of over 100 enforcement actions in the municipal securities market.�Today, Paul defends states, local governments, and their officials, brokers, dealers, municipal securities dealers, municipal advisors, and their officers and employees, as well as individuals in investigations and enforcement proceedings by the SEC, Department of Justice, FINRA, and states Attorneys General.� Paul also serves as Counsel to a NRSRO, or Rating Agency, on regulatory and enforcement matters.� He advises clients on compliance with SEC and MSRB regulations, and corporate governance matters, conducts internal investigations, and serves as special disclosure counsel in securities transactions.Paul received the "Chairman's Award for Excellence" for his work in developing the amendments to Rule 15c2-12, while at the SEC, and received "The National Federation of Municipal Analysts�Industry Contribution Award" in 2001. Paul is listed in The Best Lawyers in America� in securities law, 2005 - 2010; in corporate governance and compliance law, 2006 -�2010;�and public finance law, 2005�- 2010.� Additionally, he is listed in Who's Who and What's What on Wall Street, Who's Who in America, Who's Who in American Law,The Lawdragon 500 Leading Lawyers in America 2005 edition, and Washington D.C. Super Lawyers 2007 for securities and corporate finance.Paul is frequently interviewed and quoted as an authority on securities regulation in international news media including The National, FTSE Global Markets, BBC News, The Business Times Singapore, and The Singapore American, as well as U.S. media, including The New York Times, The Wall Street Journal, Bloomberg News, the Associated Press, Reuters, and The Bond Buyer.
The IRS said Friday that it has now caught up enough with its mail backlog to account for payments that are mailed on a timely basis. Some taxpayers will start seeing updated 500 series notices with current issuance and payment dates in late October or early November.
The 500 series of balance due notices includes three different types of notices that warn taxpayers about different stages of nonpayment: the CP501, the CP503 and the CP504.
The CP501 notice tells taxpayers they still have a balance due and what their options are, while the CP503 lets them know the IRS hasn’t heard from them yet and they may be subject to a tax lien if they don’t pay their taxes. The CP504 alerts taxpayers they need to pay their balances immediately or face the possibility of a levy of their state income tax refunds. The 500 series of notices are typically sent to taxpayers if they don’t respond to or pay their initial notice and demand on the CP14 letter.
Despite the resumption of the notices, the IRS is still in the process of catching up on millions of pieces of unopened mail, prompting a letter this week from Democrats on the House Ways and Means Oversight Subcommittee asking if the IRS will be ready in time for next tax season (see story). They also asked the IRS this week about why it was sending out notices revoking the tax-exempt status of over 30,000 nonprofits despite an extension it was supposed to have granted them for filing the Form 990 during the pandemic while it’s in the midst of processing the backlog of unopened correspondence. Earlier this month, IRS Commissioner Chuck Rettig told another House oversight subcommittee that the IRS was still processing 5.3 unopened million pieces of mail, including 2.5 million paper tax returns.
The IRS is encouraging taxpayers who can’t pay to consider some of the available payment options while penalties and interest continue to accrue.
The IRS noted that taxpayers who were affected by the pandemic or other circumstances may qualify for relief from penalties due to reasonable cause if they’ve made an effort to comply with the requirements of the law, but couldn’t meet their tax obligations, due to facts and circumstances beyond their control. Taxpayers should call the toll-free number listed on their notice to ask for penalty relief due to reasonable cause if they believe they qualify and have the supporting documentation to prove it. More information on reasonable cause relief can be found on a page at IRS.gov. Payment options and extra information can also be found on another page of IRS.gov.
