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Like any other problem you may have, tax debts won’t magically disappear if you ignore them. On the contrary, the longer you wait, the more serious they get.
Two things must happen before you receive IRS Notice CP504: You must receive multiple payment reminders from the IRS, starting with Notice CP14, and you must ignore each one.
So, in a way, getting IRS Notice CP504 is the outcome of avoiding dealing with the debt the IRS wants to collect from you.
Unlike notices the IRS sends earlier in the collection process, Notice CP504 threatens asset seizure if a taxpayer doesn’t respond to it within thirty days. Hence, you won’t have much time to pay the debt.
Our guide to resolving serious tax debt will answer all questions you may have after receiving IRS Notice CP504 and provide you with the best tax relief solutions.
Table of Contents
Notice of Intent to Levy and Asset Seizure
Notice CP504 is the fourth notice the IRS sends to taxpayers who owe taxes. The Notice of Intent to Levy only informs a taxpayer that the IRS intends to levy their state tax refund and other assets if the refund amount doesn’t cover the entire debt.
Under Section 6331(d) of IRC, the IRS has the legal obligation to inform a taxpayer of their intent before seizing their assets. Besides the state refund, the IRS can levy:
- Bank accounts
- Social Security benefits
- Real estate commissions, wages, and all other income sources
- Personal property, including taxpayer’s home or car
The IRS may also place a lien on your property if you don’t satisfy your tax obligations within thirty days of receiving Notice CP504. A lien will affect your ability to borrow against that property and might impact your credit score.
Notice CP504 isn’t the final notice of intent to levy, and you’ll receive additional correspondence from the IRS before they start seizing your assets.
The FAST Act and Seriously Delinquent Tax Debt
Owing taxes to the IRS can have even more severe consequences if your debt exceeds $52,000. The US Congress passed the Fixing America’s Surface Transportation Act on December 3, 2015, and enacted IRC Section 7345 under the same act.
The section mandates that the IRS must inform the State Department if a taxpayer owes a seriously delinquent debt. Due to the FAST Act, the State Department cannot renew or issue a new passport to taxpayers with seriously delinquent debts.
The IRS must file a Notice of Federal Tax Lien and exhaust all administrative debt collection remedies under Section 6320 of the IRC before it can classify a tax debt as seriously delinquent.
Moreover, taxpayers who owe under $52,000 don’t meet the seriously delinquent tax debt criteria. The IRS will notify the State Department if you owe more than this amount.
The State Department might revoke your passport or prevent you from leaving the United States until you resolve the tax debt.
Overview of IRS Notice CP504
You can find most of the information you need to understand the purpose of IRS Notice CP504 on the notice’s first page. The notice date, tax year, your TIN, and other valuable information are at the top of the page.
The central section of the page reveals that the notice’s purpose is to inform you of the intent to seize(levy) your property or rights to property. This portion of the notice shows the amount due immediately and explains the actions the IRS plans to take.
The letter reveals that the IRS intends to seize your state tax refund or other property because you owe taxes for a particular year. It also indicates that the IRS plans to collect assets that cover your tax liability if you don’t respond to Notice CP504 within thirty days.
The Billing Summary shows the total liability and breaks down what you owe for overdue taxes, interest, and penalties. The notice lists payment options and contains a stub you can use to pay the debt with a check or money order.
The document explains what the notice of intent to levy entails, stating that the IRS can levy your state tax refund, serve a Disqualified Employment Tax Levy, or send you a Federal Contractor Levy.
Notice CP504 arrives with Publication 594, which covers the collection process in detail and further explains property seizure and federal tax lien procedures.
The notice also informs the taxpayer that their failure-to-pay penalty will increase to 1% if the debt isn’t paid ten days after the notice date.
What to Do After Receiving IRS Notice CP504?
The IRS will satisfy the legal requirements when IRS Notice CP504 reaches you. The notice is sent as certified IRS mail, and you’ll have to sign for the mail to receive it. Hence, the IRS will know when the letter arrives at your address.
Depending on the amount due, you’ll have between 10 and 21 days to respond to this notice before the IRS takes further action. It leaves you with limited time to choose the best way to resolve serious tax debt.
The notice informs you that you can either acknowledge and pay the debt or appeal the intent to levy.
1. Explore Payment Options
Immediately paying the tax liability will prevent the IRS from seizing your assets. You can use your IRS account to complete the electronic payment or mail a check or a money order to the address indicated on Notice CP504.
You’ll have several options at your disposal if you cannot pay the entire amount in a single payment.
- Payment plans: Entering an installment agreement with the IRS will enable you to pay back what you owe in 72 months, and you can apply for a payment plan online if you owe less than $50,000.
- Offer in compromise: The IRS might agree to write off a portion of your debt under certain circumstances. But you must ensure you meet all requirements before you apply for an offer in compromise.
- Currently Not Collectible Status: The IRS will suspend the collection activities until your financial situation changes if you qualify for the CNC status. But remember that obtaining this status doesn’t erase your tax debt.
You can apply for penalty abatement if you can provide evidence that you couldn’t meet your tax obligations due to exceptional circumstances, such as illness, natural disaster, or death of a family member.
2. Request an Appeal
The simplest way to check if the information on Notice CP504 is correct is to compare it with the Balance Due on your IRS online account. Discrepancies between the amounts on the notice and your IRS account constitute the grounds for an appeal.
It’s advisable to consult a tax attorney before calling the IRS or submitting Form 9423 to determine if entering the Collection Appeals Program is the right solution for your situation.
Remember that you cannot file the appeal request after the IRS levies your assets or puts a lien on your property.
The Risks of Ignoring IRS Notice CP504
According to the IRS, no action is also an action, so they’ll consider you agree with the tax debt on Notice CP504 if you don’t contact them or pay what you owe by the notice date.
Your state tax refund will be levied if you take no action thirty days after receiving this notice, and the IRS will continue to look for other assets they can seize if the refund doesn’t cover the entire liability.
You’ll receive the Final Notice of Intent to Levy (Notice CP90), Notice LT11, or Letter 1058 informing you that you have the right to a hearing and that the IRS can seize your property or issue a lien on your property if you don’t pay your tax debt.
It’s important to note that the IRS cannot take your assets before sending you these notices. However, due to mounting interest and penalties, your tax liability will increase if you don’t respond to Notice CP504.
Frequently Asked Questions
Both notices inform a taxpayer of the intent to levy, but the IRS mainly sends Notice CP504 B to businesses. Consequently, this notice doesn’t mention that the IRS plans to take your state tax refund.
Calling the IRS and inquiring about why they sent you Notice CP504 after you paid tax debt is advisable. However, you’re not legally required to do so.
You must file a tax return for the current tax year even if the IRS sends you notice of intent to levy. Moreover, you won’t be able to set up a payment plan if you don’t file taxes.
The notice doesn’t suggest that the IRS intends to levy the tools and equipment you use for your business. Nonetheless, the IRS can seize work tools or equipment if their value exceeds $3,520.
Resolving Serious Tax Debt After Getting IRS Notice CP504
Receiving Notice CP504 doesn’t only mean your state tax refund will go to the IRS. Its implications are much more severe because you might lose your savings, social security benefits, your passport, or your home if you don’t respond to it.
Although the notice advises taxpayers to call the IRS, you should consult a tax attorney to learn more about your rights and payment or appeal options before contacting the IRS. Please visit choicetaxrelief.com or call 866-8000-TAX if you need assistance dealing with IRS Notice CP504 and resolving a severe tax debt.
Author:
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.
