A CP504 Notice is a final notice from the IRS that you owe taxes and must pay immediately. If you don’t make payment arrangements or contact the IRS, they will begin collection actions.
What is a CP504 notice?
A CP504 notice is a notice of intent to levy.
A levy is the IRS term for:
- Taking money out of your bank accounts,
- Garnishing your wages,
- Seizing business assets,
- Withholding Social Security benefits,
- Seizing your state income tax refund,
- Or taking other rights to property you have.
The IRS may also impose a tax lien on you.
Notice CP504 is generally at least the fourth notice regarding your unpaid taxes. The other IRS notices you should have received include:
- An initial notice of a specific tax problem (which notice varies based on the problem)
- A CP501 notice reminder of money owed to the IRS
- A CP503 notice second reminder of your unpaid balance
Why does the IRS send CP504 notices?
An intent to levy IRS notice is a final warning that it will begin the collection process. Unlike CP501 or CP503, there will not be another reminder.
The IRS would prefer that you take the corrective action needed to resolve your outstanding balance.
How can you verify your notice is real?
By this point, you should already be aware of your tax debt. If you get a CP504 notice out of nowhere, call the IRS immediately using the phone number on their website.
A CP504 should never be the first notice you receive unless you moved and didn’t change your address with the IRS.
Can you handle a CP504 on your own?
A CP504 notice is very serious, especially if your tax debt is large.
If you have no doubt about the amount you owe and are able to pay in full, you may want to do so immediately. Otherwise, talk to a tax professional to learn more about your options.
How should you respond to a CP504 notice?
A CP504 notice is not an audit or change in your taxes. If you disagree with changes to your tax return, you need to appeal the notice you got about those changes, not the CP504.
The main options that you have are to pay, make payment arrangements, or challenge the fairness of the IRS collections process.
What should you do if you already paid?
If you already paid, first check your IRS account online. If it shows your balance is zero, you are probably OK.
It often takes several weeks for payments to credit to your IRS account. The IRS may have printed the notice while they were still processing your payment. As long as your account shows your payment on your correct date, your unpaid balance should be resolved. It may be a good idea to call the IRS to verify.
What should you do if you can’t pay?
If you can’t pay what you owe, it’s generally a good idea to pay as much as you can as soon as you can. This reduces your interest and penalties. You can also pay with a credit card or take out a personal loan.
The IRS also offers several payment options.
- Most people can qualify for monthly payments via an installment agreement.
- If your financial situation makes you unable to pay in full and unlikely to ever be able to fully pay your balance, you may qualify for an offer in compromise. An offer in compromise allows you to settle your tax debt for less than what you owe based on your ability to pay.
- If you can’t pay anything at all, you may qualify for currently not collectible status.
What happens if you don’t respond to notice CP504?
If you don’t respond to the notice at all, the IRS will first try to take your state tax refund. If you don’t receive one or it doesn’t cover your balance, the IRS may seize your personal assets or impose a federal tax lien.
If you call the IRS toll-free number and make payment arrangements with a customer service representative, you may be able to get additional time to complete your payment plan. However, because the IRS has already sent several previous notices, they will want to see that you are trying to resolve your tax issues as soon as possible.
How can you stop a CP504 notice from happening again?
If you didn’t receive the previous IRS notices, make sure they have your current address. Any time you move, you should go to the IRS website and fill out a change of address form. Otherwise, they will send your notices to the address on your last tax return.
If you owed money due to mistakes on your tax return causing back taxes, you might want to file with a tax professional in future years. If you owed more than you could pay when you filed your tax return, check your withholding at work or your estimated tax payment requirements as an independent contractor.
A CP504 notice is a final warning from the IRS, and they really mean it this time. If you don’t pay or contact them immediately, expect them to begin collection activity in the near future.