What To Do If You Receive a CP504 Notice of Intent to Levy From the IRS

If you owe the IRS money, you can expect to receive a series of tax collection notices. If you don’t pay off the tax in full or otherwise contact the IRS to negotiate a way to pay your tax debt, the IRS will eventually file a tax lien against your property or seize your property through the use of a tax levy (or both).

One of the first levy notices you are likely to receive is CP504 Notice – Notice of Intent to Seize (Levy) Your Property or Rights to Property. At this point, the IRS is going to seize your state tax refund. Although the notice states that the IRS may seize other assets, at this point, you still have some time. The agency must send you another notice before taking any other assets.

To protect your assets, you should respond to this notice. To help you out, this guide explains why you received this notice, how to respond, and what to do next. To get help now, contact us at 20/20 Tax Resolution today.

Why the IRS Sends CP504 Notices to Taxpayers

Section 6331(d)(1) of the Internal Revenue Code (IRC) permits the IRS to take a taxpayer’s property to satisfy a tax debt but only if the IRS provides written notice of its intention to do so. This notice must be sent to the taxpayer at least 30 days before the IRS takes property with the levy. CP504 serves as this notice and it’s usually sent via certified mail.

However, the IRS doesn’t have to follow Section 6331(d)(1)’s mandates if it wants to use a jeopardy levy. This is a levy the IRS relies on if they believe giving advance notice to the taxpayer will allow them to move or hide the property so the IRS can’t seize it.

Before you get CP504 in the mail, you’ll probably get a few other notices or letters first. The below list represents some of the most common notices, in the order you’ll likely receive them:

• CP14: The IRS usually sends this notice about back taxes first.
• CP501: This is what the IRS sends next as a “reminder” about the tax balance.
• CP503: Yet another reminder letter the IRS sends before CP504.

The IRS usually provides a few weeks to a few months between notices and letters. By the time you receive CP504, it’s safe to assume that at least a few months have elapsed from the tax assessment and the IRS warning you about an impending tax levy.

What Does a CP504 Notice Look Like?

The IRS offers a great example of what the typical CP504 Notice looks like. There’s a lot of information included in this document, but the IRC requires this notice to contain, at a minimum, the following information:

• The relevant provisions of the IRC that apply to your case and the IRS’ plan to levy your property.
• The process the IRS will follow to levy your property.
• Your option to appeal and how to file that appeal.
• Options available to avoid the levy and find an alternative arrangement with the IRS to pay your back taxes.
• How you can reacquire your property after the IRS levies it or files a lien on it.
• Information relating to the revocation or denial of your U.S. passport.

What Happens After the IRS Sends CP504?

If you don’t respond to CP504, the IRS will take your tax refund. Before taking other assets, however, the agency will usually send at least one more notice or letter, often CP90, LT11, or Letter 1058.

If you receive CP90, LT11, or Letter 1058, it’s a sign that the IRS has decided to use a levy and that it’s coming. These documents serve as the IRS’ final notice before the levy, and they also explain your rights to a hearing if you disagree with the IRS levying your property.

What to Do If You Disagree With the CP504 Notice from the IRS

If you disagree with the IRS, you need to first identify the reasons you disagree and what evidence you have to support your contention. Here are some potential reasons to disagree with the IRS and what you can do in response:

• You already paid off your tax bill: You’ll want to make sure you have proof of payment, such as a scan of the deposited check, a ledger entry from your online bank account, or a paper bank statement.
• You have negotiated with the IRS to pay your tax balance off over time: Find copies of the necessary paperwork showing that an installment agreement or payment plan is already in place.
• You’re the victim of identity theft: Contact the Taxpayer Advocate Service and explain what happened. They can guide you through the next steps.
• You agree that you owe taxes, but disagree on the amount: Get a copy of your tax transcript. The tax transcript will have information showing the basis for the tax amount and any changes to that amount, such as payments you’ve made, interest, and penalties. A tax pro can help you interpret your tax transcript and confirm if the amount the IRS is trying to collect is correct.
• Your spouse owes the tax debt: Consider applying for innocent spouse relief. In certain cases, the IRS will agree that the tax debt it’s trying to collect belongs to your spouse and not you.

Based on the reasons for your disagreement, the first thing you can do to explain your position is to contact the IRS. There should be a toll-free number located near the top right of your CP504. Before you call, have all of your relevant documentation ready and be prepared to explain why you disagree with notice CP504.

If calling the toll-free number located on your CP504 Notice doesn’t work, you may need to file an appeal. You’ll likely use the Collection Appeals Program (CAP) to do this and you can start the CAP process by calling the toll-free number provided on your CP504 Notice in the section discussing your appeal rights. Another option is to complete IRS Form 9423, Collection Appeal Request. You have 30 days from the date of your CP504 Notice to file your appeal.

Responding to CP504 If You Agree With the IRS and Can’t Pay

If you agree that you owe the tax amount the IRS is trying to collect, then the quickest way to deal with this notice is to pay the full amount. However, this is unlikely to be a realistic option, so you’ll most likely need to find a way to either pay the full tax amount over time or ask the IRS to agree to reduce the amount you owe.

If you need more time to pay, you may want to request an installment agreement so that you can make monthly payments on your tax debt. The IRS generally approves most requests if you owe less than $50,000 and can pay off the balance within 72 months. You can also set up installment agreements on larger tax debts or for longer time periods, but in those situations, the IRS typically requires you to file a collection information statement.

If you can’t pay any amount due to your financial situation, there’s something called Currently Not Collectible (CNC) status. With CNC status, the IRS agrees to temporarily halt its collection efforts but reserves the right to periodically review your financial situation to see if it’s improved enough to justify the IRS resuming its collection efforts.

Note that CNC status doesn’t remove your tax debt and any applicable interest and penalties continue to accrue. Also, the IRS only grants CNC status to taxpayers who are really struggling financially. This means they can’t afford to pay both their taxes and their basic living expenses. In other words, the IRS intends to grant CNC status to taxpayers who risk becoming homeless or going hungry if the IRS tries to collect their tax debt.

If you want to try to reduce your tax debt, you have three main options. First, you can submit an offer in compromise. This is where you offer to pay as much of your tax debt as you can and ask that the IRS forgive the amount you can’t pay. Second, you can ask the IRS to remove some of the penalties it has imposed against you with something called penalty abatement. Third, you set up a Partial Payment Installment Agreement (PPIA) with the IRS where you make monthly payments to the IRS. After a certain amount of time, you stop making monthly payments and the IRS forgives any remaining balance.

20/20 Tax Resolution Can Help With Your CP504 Notice

Dealing with an IRS collection action can be an intimidating and complicated endeavor, depending on the facts of your case and the reasons the IRS believes you owe them money. So it’s understandable that you might want to get some professional tax advice.

This is where the tax pros from 20/20 Tax Resolution can help. We have experienced professionals who know how the IRS collection process works and how to work with the IRS to find a solution to an unresolved tax matter. Contact us to set up a free consultation.

CP504 Notice FAQs

What happens if I refuse to sign for the CP504 notice sent via certified mail?

You shouldn’t do this because not signing for the letter won’t stop the IRS from levying your property. The law only requires that the IRS send CP504 to your last known address before levying your property.

What happens if I ignore Notice CP 504?

You’ll probably get one more notice before the IRS levies your property and/or files a Notice of Federal Tax Lien. You could also be subject to levies that go after property other than your state tax refund check. Then there’s the possibility that the State Department revokes your current passport or denies your request to renew one (or obtain a new one).

The Fixing America’s Surface Transportation (FAST) Act added Section 7345 to the IRC, which allows the IRS to inform the State Department of taxpayers with significant tax debt (more than $52,000). Once informed, the State Department has the discretion to revoke, decline to issue, or refuse to renew a passport to otherwise eligible U.S. citizens.

What is a CP504b Notice?

This is basically the same thing as a CP504 notice, except it’s for business taxpayers.

Is it ever okay to ignore a CP504 Notice?

The only time this would be the correct course of action is if you already made arrangements to deal with your tax debt by the time you get CP504 in the mail. For instance, you may have entered into a payment plan or installment agreement with the IRS or already paid off your balance.