The IRS announced it is temporarily suspending the issuance of three balance due notices: CP 501 (unpaid balance due), CP 503 (reminder of unpaid balance due) and CP 504 (initial notice to collect by means of levy). These follow-up letters are automatically issued to taxpayers who do not respond to an initial CP 14 balance due notice. The IRS is suspending the follow-up notices to lessen confusion to taxpayers who might have mailed their payment to the IRS, but because of the unopened mail inventory, could otherwise receive an automatic follow-up notices suggesting the payment had not been made. The IRS cautions that while it endeavors to suspend the automatic follow-up notices, some may have already been mailed. The temporary suspension will remain in effect while the IRS assesses its unopened mail inventory and decides at a future date when it will resume automatic issuance of the notices. The IRS continues to advise taxpayers not to cancel their checks and to ensure funds remain available to avoid potential penalties and interest. However, if any dishonored check was received between March 1 and July 15, 2020, the IRS will grant ‘bad check’ penalty relief.
The IRS previously announced that once it processes the payment, the payment will be posted as of the date the IRS received the payment and not the date it processed the payment. Thus, the IRS stated that any automatically posted late penalty will self-correct and taxpayers need not respond to late payment penalty notices if they timely mailed tax payment checks due by July 15, 2020. In a prior alert, we explained that the IRS is incorrectly applying IRC 7502 because a ‘timely mailed payment’ is considered ‘timely paid.’
Taxpayers should carefully review any notices they receive from the IRS. If a taxpayer confirms that the payment has not yet been processed, the IRS recommends not responding to payment due notices. However, if a penalty notice asserts a delinquency penalty because the tax payment was received or processed late, but was timely mailed, such penalty notice may require the taxpayer to respond with a proof of timely mailing of the check and an explanation of the provisions in section 7502.