Received a CP501 notice for my already paid 2017 taxes - new penalties?

This actually happens more often than you'd think. The IRS can reassess penalties up to 3 years after the original filing date. What likely happened is their automated system did a secondary review of your account and determined that the original penalty calculation was incorrect. Even though your balance showed zero after they took your refund, their system can still flag accounts for additional review. The late filing penalty is typically 5% of unpaid taxes for each month your return is late, up to 25%. If they initially calculated it incorrectly, their system will eventually catch it. For a small amount like $27, it's probably easiest to just pay it. But if you want to challenge it, you can request penalty abatement through the IRS's First Time Penalty Abatement policy if you've had a clean compliance history for the three years prior to 2017.

After getting stuck in IRS limbo with a similar late penalty situation, I found this amazing tool called taxr.ai (https://taxr.ai) that saved me so much headache. I uploaded my CP501 notice and transcript, and it explained exactly why the additional penalty was added and what my options were. It turns out the IRS's automated system sometimes flags accounts for secondary reviews months or even years after the initial filing. The tool analyzed my documents and showed me that they had applied an additional failure-to-file penalty that wasn't calculated in the initial assessment. Apparently this happens a lot with amended or late returns. The best part was that taxr.ai showed me exactly what to include in my response to the IRS and even created a draft letter for me requesting abatement.

I wanted to update after trying taxr.ai with my own CP501 notice. I was genuinely surprised at how helpful it was! I uploaded my notice and my transcript (which I had pulled from the IRS website), and within minutes I had a clear explanation of what was happening. In my case, they explained that the IRS had applied an additional failure-to-pay penalty that wasn't included in their initial assessment. The tool actually showed me where this appeared on my transcript (which I totally missed) and gave me options: pay the small amount, request a payment plan, or request First Time Abatement with a template letter. I chose to request abatement since I had a clean record before, and the letter template they provided clearly cited all the relevant IRS policies. Definitely saved me hours of research and confusion!

If you need to actually talk to someone at the IRS about this CP501 notice (which I recommend for peace of mind), try using Claimyr (https://claimyr.com). I was in the EXACT same situation with a random penalty showing up years later, and I spent days trying to reach the IRS with no luck. I was super skeptical about this service, but I was desperate after trying to call for two weeks straight. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Basically, they hold your place in the IRS phone queue and call you when an agent is about to answer. When I finally got connected to an IRS agent, they explained that their automated system had done a second review of my account and found that the original penalty calculation was incomplete. The agent was actually able to verify that I qualified for abatement and processed it right there on the phone!

Alright I need to apologize and update everyone. After posting my skeptical comment, I decided to just try Claimyr as a last resort for my CP501 issue. I was 100% convinced it wouldn't work and was preparing to write a scathing review. Well, I was completely wrong. I got a call back in about 45 minutes, and suddenly I was talking to an actual IRS agent! I explained my situation with the random penalty appearing years after I thought everything was settled. The agent looked at my account and explained that their automated system had flagged my account during a review cycle and added a penalty that wasn't originally calculated. Here's the amazing part - she was able to check my filing history, saw I qualified for First Time Abatement, and removed the penalty IMMEDIATELY. My balance is now zero again. I spent months trying to handle this on my own with no success, and it was resolved in one 10-minute phone call.

Just an FYI - you might want to double check if they charged you interest on that penalty amount too. When the IRS adds penalties later, they often backdate the interest to the original due date. So your $27 might have a few dollars of interest tacked on as well. If you decide to pay it, make sure you're paying the full amount shown on the most recent notice, not just the penalty amount you saw on your transcript. Otherwise you might keep getting notices for the small interest amount.

Has anyone actually gotten through to the IRS using the normal phone numbers lately? I've been trying for THREE WEEKS to talk to someone about my CP501 notice. Every time I call, I either get the "we're too busy, call back later" message or get disconnected after waiting on hold for an hour.

For what it's worth, I had a similar situation with a CP501 for a small amount from a previous tax year that I thought was fully paid. I just went ahead and paid it online through the IRS Direct Pay system. Took about 3 minutes and I never received another notice. Sometimes the peace of mind is worth more than the $27, especially when you consider how much time you might spend trying to get it abated. Unless you're concerned this might happen again or there's a principle involved, sometimes it's just easier to pay it and move on.