If you owe the Internal Revenue Service (IRS) back taxes, you will receive a series of letters informing you of where you currently stand. The longer you ignore these notifications, the more likely it is that you’ll find yourself holding a Notice of Intent to Levy, or a CP504 Notice. The breakdown of notices are as follows:
- CP14 and/or CP501: You owe unpaid taxes on one of your accounts.
- CP503: The IRS still hasn’t heard from you and you still have an unpaid balance
- CP504: An intent to levy, but it’s not the final notice. If you do not pay the amount due immediately, the IRS will seize your state income tax refund and apply it to pay the amount you owe.
- CP90 or LT11 or Letter 1058: Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
The IRS sends a CP504 notice as a follow-up to previous letters informing you of your IRS tax debt and payment requests. The initial collection process starts with a Notice CP14 from the IRS. The CP14 is the first notice the IRS will send you informing you that you owe unpaid taxes.
IRS CP504
An IRS CP504 notice is a Notice of Intent to Levy, meaning the IRS is warning you that it may legally seize your property to collect unpaid taxes. This is typically not the first notice you receive, but it is a serious escalation in the IRS collection process.
A CP504 notice indicates that your tax debt remains unpaid and the IRS is preparing to take collection action, which may include levying wages, bank accounts, and state tax refunds. It may also signal that the IRS could file or has already filed a federal tax lien.
Once you receive a CP504 notice, you generally have 30 days to act before further enforcement begins.
To respond to a CP504 notice, you should take immediate action, such as:
- Paying your balance in full if possible
- Setting up an IRS installment agreement or payment plan
- Contacting the IRS using the number on the notice if you disagree or cannot pay
- Requesting a Collection Due Process (CDP) hearing if you want to challenge the proposed levy
A CP504 notice is issued after earlier IRS collection notices have been ignored or unresolved, and it is part of the formal IRS process required before certain collection actions can proceed under federal law.
Ignoring a CP504 notice can result in continued penalties and interest, as well as enforced collection actions such as wage garnishment or bank account seizure.
Is CP504 the Final Notice
An IRS CP504 notice is a Notice of Intent to Levy and is often considered a final reminder to pay your tax debt, but it is not the final legally required notice before the IRS can seize wages or bank accounts.
While the CP504 notice signals that your case has reached an advanced stage in the IRS collection process, the IRS must still issue a final Notice of Intent to Levy (such as Letter 1058 or LT11) before it can proceed with most enforced collection actions, including wage garnishment or bank account levies.
The CP504 notice does indicate serious enforcement risk and allows the IRS to take certain actions, such as seizing your state tax refund, if the balance remains unpaid.
What Comes After a CP504 Notice
If you do not respond to a CP504 notice, the IRS may issue a final levy notice, which gives you 30 days to request a Collection Due Process (CDP) hearing before enforcement begins.
Key Takeaway
The CP504 notice is a serious warning and final reminder in the early collection stage, but it is not the final notice before full IRS levy action occurs.
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What Exactly Is the Purpose of an IRS CP504?
When the IRS sends you a CP504 notice letter, the government entity satisfies a legal requirement to give you notice of its intent to levy your assets, as necessitated by Internal Revenue Code section 6331(d). This official notice outlines the amount you owe, and it often includes penalty and interest charges due to unpaid or delinquent balances.
This notice means the government will find a way to forcibly take what is owed by searching for recoverable property or other assets as payment. The IRS is authorized to take this collection action after prior attempts to resolve the balance have failed.
Tax codes limit what the government can take, with allowances for certain personal property and tools used to derive income (i.e., business tools or property). Limits also exist for expense categories, including housing, clothing, and transportation. Additionally, the IRS uses tax code limits to calculate what a taxpayer can actually pay, coming up with a Reasonable Collection Potential based on taxpayer answers provided on IRS financial disclosure forms.
This determination does not eliminate your tax debt but can temporarily delay the collection process and allow you time to improve your financial situation and become more compliant with your obligations. While the CP504 is not a final notice before enforcement, it is a serious warning that can lead to enforced collection measures if you fail to respond or settle the account.
Paladini Law can help you review your options, submit necessary forms, and contact the IRS on your behalf. Our team can help ensure that response deadlines are met and assist in avoiding further escalation. If you’re unsure of your next steps, schedule a consultation to discuss how to resolve your situation and prevent future notices or additional penalties.
Do Not Ignore an IRS CP504 Notice
Ignoring the IRS only makes things worse. Not paying the full amount due or making an effort to contact the IRS or legal counsel to advise you of your options can be a financially injurious mistake. Even if you still have a partial outstanding balance, the government can seize or “levy” your state tax refund or take possession of other property.
You also might be in danger of the IRS filing a Notice of Federal Tax Lien on your property, interfering with your full rights to your property, and hindering your ability to sell or borrow against the property. These tax liens can affect your credit score, notify creditors of your obligation to the IRS, and place at stake your professional licenses.
If you haven’t already received a notice for the hearing, failure to pay can result in the notice given for you to appear before the IRS Independent Office of Appeals. After this time, your property or rights to your property is in jeopardy.
Property subject to seizure includes:
- Wages, real estate commissions, and other income
- Bank accounts
- Business assets
- Personal assets (including your car and home)
- Social Security benefits
How to Request a Collection Due Process Hearing After an IRS CP504 Notice
Receiving a CP504 notice from the IRS is an initial alert about unpaid taxes, a warning that further action may be taken if the debt remains unresolved. If you find yourself in this situation, here’s how you can request a Collection Due Process (CDP) Hearing:
- Anticipate Further Notices: After receiving multiple CP504 notices, you might get a Notice of Proposed Levy or a Notice of Federal Tax Lien. These signals indicate that the IRS is escalating the situation.
- Eligibility for a CDP Hearing: Generally, the right to request a CDP Hearing arises when you receive a notice proposing a tax lien or levy. Verify that no additional letters have been sent that could impact your eligibility.
- Submitting Form 12153: To initiate the CDP Hearing, complete Form 12153, Request for a Collection Due Process or Equivalent Hearing. It’s crucial to submit this form within 30 days of the date on your levy or lien notice to enjoy full rights, including opportunities for tax court reviews.
- Understand the Timing: Filing outside the 30-day window results in an equivalent hearing rather than a standard CDP Hearing. While an equivalent hearing allows discussion with the IRS, it does not grant the same legal protections or opportunities to challenge in tax court.
- Engage With the Process: After you’ve submitted the form, the IRS will typically schedule a meeting, allowing you to discuss payment options or contest the notice.
- Preparation for the Hearing: It’s advisable to gather all relevant documentation and, if possible, consult with a tax professional to prepare your case effectively.
By following these steps, you can leverage the CDP Hearing to potentially halt enforced collection actions while seeking a more manageable resolution to your tax obligations.
How Can a New Jersey IRS Tax Attorney Help You Respond to an IRS CP504 Notice?
Since receiving a Notice CP504 is a time-sensitive manner, the sooner you speak to an attorney, the better your chances will be of avoiding further action or hassle from the IRS. Instead, your attorney can handle all correspondence with the government office and inform them of your intent to resolve your debt to prevent additional collection efforts.
Your attorney can develop a strategy to respond. You’ll want to retrieve IRS account transcripts to ensure the amount owed is accurate. Once you’ve confirmed the correctness of what you owe, your attorney can help you devise a payment plan or come to a settlement that is agreeable to all parties. If you need to dispute the amount owed, your attorney can help you do so. You will need to file an appeal to receive a hearing where your attorney can help you plead your case to deter further collection efforts.
You might also have a reason to file an amended return to reduce the amount you owe. You can file certain amended returns electronically, while others you will need to send via mail. An amended return can take up to 16 weeks to process, whether filed online or submitted by paper filing through the mail.
Your attorney can also assist you with the preparation of a penalty abatement request. This abatement is applicable for certain taxpayers under the First Time Penalty Abatement policy and offers administrative relief from imposed failure-to-pay penalties. This relief might be available to you if you meet certain conditions per the IRS policy. Your attorney can review these conditions with you to determine if you qualify for this relief.
How serious is an IRS Notice CP504?
A CP504 notice is serious; you do not want to ignore it. This notice is the IRS informing you of its intent to cover your debt by issuing a levy against your state tax refund, searching for and seizing your assets, and filing a Federal Tax Lien against your property interests affecting your rights to your property. Additionally, a Notice CP504 can result in the denial or revocation of your United States Passport per the Fixing America’s Surface Transportation (FAST) Act legislation. This legislation prevents state departments from issuing or renewing passports to taxpayers with seriously delinquent or unresolved tax debts.
How much time do I have to respond or take action?
Your balance is due by the date shown on the notice. Usually, the IRS gives you thirty (30) days to take corrective action when noticed with a CP504 form. By the time you receive a CP504 notice, though, your payment is technically past due.
Do I have to make a full payment right away to avoid additional penalties?
There are several different ways you can respond to a Notice CP504 if you are unable to pay, aside from making full payment. Paladini Law can inform you of the different avenues you can take to resolve your tax issue. Acceptable resolutions might include: filing an appeal, amending your tax returns, negotiating a payment plan, settling your debt for a lesser amount, and requesting administrative relief for your failure-to-pay penalties.
What if I’ve already paid my balance or taken other corrective actions?
Even if you’ve already taken corrective actions to resolve your IRS debt, you need to contact the number printed at the top of the CP504 notice to make sure your account reflects payments made, installment agreements entered into, disputes filed, or other actions are taken. Contact us to help ensure you are following proper procedures correctly and you have taken the appropriate steps to avoid further liability and aggravation.
Who should I contact if I have more questions?
If you have questions about your notice, there’s a number to contact the IRS in the upper right corner of the document. Printed directly under the contact number, there’s a caller ID assigned to you to have ready when you call. Additionally, you should contact Paladini Law to advise you of your rights.
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Call Paladini Law to Resolve Your IRS CP504 Notice
If you’ve received a CP504 notice and you have questions or need legal advice about your rights, contact Paladini Law at (201) 381-4472 or schedule your free consultation now. Brad Paladini helps taxpayers in New Jersey and across the U.S. deal with the IRS, avoid tax penalties, and save their hard-earned money and property. Attorney Paladini is ready to review your case and help you determine if you need legal counsel to resolve your tax debt.
