If you have a balance due with the IRS, you will likely receive several collection notices reminding you about it. Generally speaking, the IRS starts with the CP501 and then sends the CP503. If you don’t respond to either of these letters, the IRS will send CP504 (Notice of Intent to Levy). 

For individuals, this is often the third notice, but it tends to be the fourth notice that businesses receive. Ignoring the IRS’s initial notices will lead to more penalties and interest on your account, but if you ignore this notice, the IRS will seize your state tax refund and start looking for other assets to take. Keep reading to learn more.

Why Did the IRS Send Me a CP504 Letter?

The IRS sends Notice C504 to anyone who owes a balance on their tax bill and hasn’t made arrangements to pay. This letter follows IRS Notices CP501 and CP503, which are the first and second reminders from the IRS about your due tax bill. If you fail to respond to these notices, the IRS will send you a CP504.

What Is IRS Notice CP504?

Notice CP504 is a final notice of intent to levy. In plain English, that means that the IRS is going to start taking your assets to cover your unpaid tax bill. The agency starts with your state tax refund. If that doesn’t cover the full bill, the IRS will attempt to garnish your wages, take the money in your bank account, and seize your assets. 

Notice CP504 lists details about your exact balance owed, including interest accrued and any penalties you may be facing for late and unpaid taxes. The notice will also show you the due date for payment, as well as a list of some of the consequences that could materialize if you fail to make payment or seek out a payment plan. 

In addition to explaining asset levies, this notice will also note the IRS’s right to tell the State Department to take away your passport. This can happen if you have seriously delinquent tax debt, which is tax debt above $62,000 as of 2024. The number is indexed to inflation. 

Finally, the CP504 letter will contain contact information in order for you to pay by mail, get in touch with the IRS about making a dispute claim, or set up a payment plan.

Is My CP504 Notice Legitimate? 

It’s good to be aware that tax-related scams are on the rise. Now that IRS processes are back to normal levels after the pandemic, scammers are increasingly looking to target stressed and vulnerable taxpayers. One way they do this is by sending fake IRS letters, pushing people for payment. 

In order to protect yourself and be certain that your CP504 notice is real, be sure to scan for any potential red flags, such as poor grammar, spelling mistakes, or explicit threats of jail time. Remember that the IRS will never issue a letter with threatening language. Call a tax attorney if you are unsure whether or not the letter is really from the IRS.

Don’t Ignore Your CP504 Letter

Sometimes, the IRS can get things wrong, and details about the balance owed on your tax accounts can be inaccurately presented. If the amount due shown on the notice is incorrect, reach out to the IRS ASAP. Even if you agree with the amount due shown, you should also try to make payment arrangements as soon as you can.

It’s never a good idea to simply ignore an IRS notice. However, ignoring this notice is worse than ignoring the other notices. By the time the IRS sends out this notice, the agency is serious about collecting the tax debt, and it’s getting ready to resort to enforced collection actions. On top of that, delaying your response further will also generate more interest and penalties to your bill. 

Whether you agree or disagree with their assessment, it’s important to reach out to the IRS by either paying the balance or getting in touch about a dispute. 

How to Respond to an IRS CP504 Notice

Receiving a CP504 notice is serious, so it’s a good idea to give it your time. Make sure you read and understand the letter to respond quickly and appropriately. If you are content with the IRS’s assessment of your tax bill and can pay it in full, that should be your course of action.

To pay the balance right away, you can tear off the attached pay stub and write a check or money order according to the instructions in the letter. Alternatively, you can pay online. If you have questions about making payments, just give the IRS a call on the toll-free number provided on the notice. The IRS now includes QR codes on the notices where you can scan the QR code with your phone to get redirected to a page to make payment to the IRS. 

If you agree with the tax assessment bill, but you can’t pay the balance in full, then you’ll need to contact the IRS. You can do this right away to prevent the IRS from taking your assets. Note, however, that even if you set up a payment plan, the IRS will probably still take your state tax refund (up to the amount of your tax owed).

If you have recently just paid your tax bill, you should contact the IRS to ensure the payment was received. It’s possible that the IRS could have sent the notice to you just before your payment was complete and your account was credited.

What If I Disagree With Notice CP504?

If you disagree with the total balance owed according to your CP504 letter, you can appeal your tax liability. It is possible to dispute unpaid taxes if you believe the assessment to be incorrect. However, the appeals process is specific and must be navigated according to IRS rules. Consider contacting an attorney for help.

Furthermore, if you disagree with the penalties listed on your letter, you can also apply for penalty abatement. For most first-time offenses, the IRS will often waive penalties as long as you can provide a reason for paying or filing late.

If you want to stop the IRS from taking your assets, you also have the right to appeal the collection action. In this case, you will generally meet with a Revenue Officer or other IRS employee over the phone. During this meeting, you can explain how the levy will hurt you, and you can request a payment plan. 

What if I Can’t Pay My Tax Bill?

If you can’t afford to pay your tax balance in full at the moment, you should contact the IRS immediately in order to work out alternative payment arrangements. Depending on your situation, you may be eligible to apply for assistance through one of the several programs offered by the IRS. 

It’s never easy asking for financial help, but it’s important to get this process started as soon as possible in order to avoid further notices and the risk of collections. The sooner you contact the IRS and tell them you can’t pay the bill, the better.

IRS Payment Options

The IRS has several common routes available to help those who can’t afford to pay their tax bill. The primary option is an installment agreement (IA). This is essentially a monthly payment plan that allows you to pay off your tax balance in manageable payments. 

Installment agreements are generally either short or long-term, depending on your financial situation. Eligibility depends on many factors, and if you owe over a certain amount or have a history of tax problems, you’ll have to provide documented proof of your finances in order to qualify. 

Currently Not Collectible Status

Currently not collectible, or CNC status is another option for those who can’t afford to pay off their tax balance. This is an extreme alternative for those who can show that paying their tax bill would result in financial hardship for them and/or their family. The IRS will formally put a halt on all collections activity for a determined period if CNC status is given. 

CNC is also known as financial hardship. To qualify, taxpayers must show proof of their finances and show that they can’t pay the tax owed and still cover their basic living expenses.

Offer in Compromise

Another common payment alternative at the IRS is an offer in compromise (OIC). This is when you negotiate with the IRS to settle the taxes owed for a lesser amount. In this case, the IRS must accept that they’re unlikely to receive the full balance and are willing to compromise. There are strict requirements to meet in order to be eligible for OIC, but it’s an option for some.

IRS Notice CP504 – FAQ

What is an IRS CP504 Notice? 

This notice is a third reminder that you owe the IRS overdue taxes. It is an intent to levy notice. It explains that the IRS has the right to take your state tax refund, assets, and passport if you have unpaid taxes.

How do I respond to IRS Notice CP504?

If possible, you can respond to a CP504 notice by paying the amount owed immediately. You can make payment online, or send a check or mail order to the address shown in your letter.

If you can’t pay the balance in full, you may qualify for an installment agreement with the IRS, or an offer in compromise. You might also be eligible for currently not collectible status, which puts a hold on all IRS collections activity against you.

What if I want to dispute Notice CP504?

If you want to dispute your tax liability, find the relevant contact information from the IRS on your CP504. Or contact a tax attorney to help you with the collection appeals process.

Resolve Your Tax Debt Issues

Receiving a notice from the IRS is always a stressful event. A lot of people ignore these notices due to the stress, but once the situation gets to this point, you need to respond. 

Unfortunately, however, it may also be difficult to know how to proceed and resolve the issue if your tax situation is complex. Remember that the most important thing is to address it, one way or another. Ignoring a CP504 notice won’t do you any favors. 

If you’re struggling to know where to begin and how to deal with your tax liability, you will benefit from working with an experienced tax firm. At Damiens Law our expert tax attorneys know the IRS inside and out, and we can help you navigate your way to a resolution while taking some of the load off your shoulders. Get in touch with us today if you’ve got a tax liability that needs resolving.