Notice CP504

Receiving an IRS notice is almost always stressful. The notices are often written aggressively or they don’t make sense to taxpayers. 

The CP504 can be especially confusing because it says the IRS is going to take your assets – however, you still have time to react before the agency starts going after income, bank accounts, or other assets. At this point, the agency is only going to seize your tax refund.

Key takeaways

• CP504 – IRS is going to seize your state tax refund.
• How to stop – Usually, you can only save a refund if you’re facing severe financial hardship, but even then, it’s not easy.
• What happens next – The IRS will send additional notices before taking other assets.
• How to respond – Pay in full, set up payments, or contact IRS for relief options.
• What if you disagree – Contact the IRS immediately.

If you want to get help now, contact us today at the W Tax Group. 

What Is IRS Notice CP504?

IRS Notice CP504 is sent to inform you of the IRS’s intent to levy your state tax refund. If the situation escalates, the IRS can also levy your wages, bank accounts, and other assets, but you will receive another notice before that happens. Additionally, the agency can tell the State Department to revoke, deny, or refuse to issue your passport.

What is IRS Notice CP504B?

If the IRS intends to levy a business tax refund Notice CP504B will be sent. Again at this point, the agency must send additional notices before seizing any other assets.

Why Did I Receive This Notice?

IRS Notice CP504 notifies you of the IRS’s intent to levy your tax refunds, but if you don’t pay after receiving this notice, the IRS can take further steps to seize your property and assets. Before the IRS seizes your property, a final notice of intent and right to a hearing will be issued. 

The IRS has sent you this notice because you have a balance that was not paid by the due date. After the due date, they attempted to send a follow-up notice that you failed to respond to. 

Before the IRS sent Notice CP504, they may have sent other notices alerting you of your current tax situation, such as notices CP14 and CP501. 

Can I Stop the IRS From Taking My Tax Refund?

Generally, no, you cannot stop the IRS from taking your state tax refund. 

However, if you’re experiencing severe financial hardship – for example, you may lose utilities or get evicted without your refund, you may be able to keep a portion of it. However, this is not a guarantee, and you need to reach out immediately to the state or the IRS if you’re in this situation. 

As long as you owe tax debt, the IRS will seize your state and IRS tax refunds. This is true, even if you’re making payments or on currently non-collectible status.

How to Respond to CP504

Review the notice to see if you agree with it or not and then follow the tips outlined below, or contact a tax professional for help.

If You Agree With The Notice

If you agree with the notice, consider the following:

1. Pay Amount in Full– You can pay the full amount directly through the IRSs website from a bank account, debit card, credit card, or digital wallet.
2. Installment Agreement– If you cannot pay the full amount you can make scheduled monthly payments until the amount is paid off in full with interest. 
3. Partial Payment Installment Agreement– This can be an option where you pay monthly payments but are unable to pay the full amount within the collection period, or by the Collection Statute Expiration Date (CSED), typically ten years after the assessment date. When the CSED is reached the remaining balance will be written off. 
4. Currently Not Collectible Status– If your financial situation does not allow for you to pay your balance you can file for a Currently Not Collectible Status. If you qualify, the IRS will stop collection actions until your finances improve.
5. Innocent Spouse Relief– This is only applicable if you and your spouse filed a joint tax return and your spouse underreported their income without your knowledge. If you qualify, the IRS will separate the liability and only hold you responsible for your portion of the bill. 
6. Offer In Compromise– This option allows you to settle with the IRS for less than the amount you owe. But you must prove that you don’t have enough income or assets to pay the full tax debt.

In addition to considering the above options, you should look into penalty relief. The penalties on unpaid balances can get very high, and if the IRS agrees to abate your penalties, you can reduce your balance substantially. 

If You Disagree With The Notice

If you disagree with IRS Notice CP504, contact the IRS immediately via the number shown on your notice.

As previously mentioned, it is much easier to prevent a levy than to remove one, so it is important to act quickly. It is also advised that you contact a tax professional to advise you in your case against the IRS. It is possible to file an appeal under the Collection Appeals Program (CAP). Additionally, you must keep any documents that provide evidence as to why the notice is incorrect.

If you choose to dispute the notice via the Collection Appeals Program the process is fairly simple, however, you are required to accept the court’s outcome – you cannot appeal CAP decisions. First, you will contact a tax professional for guidance and gather evidence to support your claim. Then, you will attend a hearing (often over the phone) in which you represent yourself or are represented by another party or tax professional. The court will then decide the outcome.

What If I Ignore CP504?

The IRS will send another notice, and then, the agency may move forward with these types of levies:

• Wage garnishment – the IRS has your employer send a portion of your wages to the IRS to cover unpaid taxes.
• Bank levy – The IRS tells your bank to send the funds in your account, up to the amount of your tax debt, which is often the full balance of the account.
• Asset seizure – The IRS seizes any personal or real property that you own, except for a small amount of assets that are protected from IRS seizure.

FAQS About Notice CP504

Is the IRS going to file a tax lien?

IRS Notice CP504 may also state that the IRS intends to file a tax lien. However, the IRS may have already filed a tax lien. The IRS doesn’t have to notify you in advance about tax liens. Instead, the agency must notify you within five days of filing the lien.

A tax lien means that the government has a legal claim to your property. In many ways, it lays the legal groundwork so that the IRS can seize your property and assets due to tax debt. 

Is the IRS going to seize my passport?

The IRS also has the power to advise the State Department to revoke or deny the taxpayer’s passport. This is per the Fixing America’s Surface Transportation (FAST) Act that prohibits a taxpayer’s right to a passport due to them being in seriously delinquent tax debt. 

To avoid these collection actions, you must pay the full balance owed or contact the IRS directly to set up a payment plan. If you disagree with the notice, contact them immediately and consult a tax professional. 

Can I request a Collection Due Process hearing?

No, CP504 does not give you the right to request a collection due process hearing. However, if the next notice you receive is a Final Intent to Levy like the LT1058, you will have CDP appeal rights.

Which Assets Can The IRS Seize?

If the balance owed cannot be fully covered by your tax refund, the IRS can legally claim other assets such as your wages, real estate commissions, payments, bank accounts, and social security benefits. The IRS can also take personal and real property and get the State Department to revoke your passport. 

The IRS cannot seize all of your assets, but there are very few limits as to what the agency can take. For example, the IRS cannot seize assets used to provide income and/or assets needed for basic living needs. 

IRS Notice CP504 focused on seizing your tax refund, but it mentions other assets. However, if the IRS decides to seize further assets a follow-up notice such as the LT11 or LT1058 will be issued. 

Get Help With Notice 504

Contact a tax specialist at W Tax Group to solve your tax problems and get the outcome you deserve. We are a team of tax attorneys and certified tax resolution specialists who seek to provide the best guidance for our clients. 

Our mission is to help taxpayers in our local area and nationwide and defend them against the aggressive collection policies of the IRS and the state revenue agencies. If you’re facing an IRS tax levy, get a 100% free consultation by contacting us online or calling (877) 500-4930.