Receiving an IRS notice is almost always stressful. The notices are often written aggressively or they don’t make sense to taxpayers. To help you out, we’ve put together this guide to Notice CP504. If you want to get help now, contact us today at the W Tax Group.
What Is IRS Notice CP504?
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. Additionally, the agency can tell the State Department to revoke, deny, or refuse to issue your passport.
IRS Notice CP504 is the final reminder sent by the IRS. This notice is regarding personal finances. If the IRS intends to levy a business tax refund Notice CP504B will be sent. IRS Notice CP504 is an urgent notice that must be responded to immediately. To find out what to do in this situation and how to respond to IRS Notice CP504, keep reading. Otherwise, contact us at the W Tax Group to get help now.
Why Did I Recieve This Notice?
The IRS sends Notice CP504 to notify you that if you do not pay the balance you owe, the IRS will levy your tax refund to pay the balance. IRS Notice CP504 notifies you of the IRS’s intent to levy your tax refunds, but if the situation escalates and a partial balance remains, the IRS can take further steps in seizing 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. The situation has now escalated and the IRS has sent Notice CP504, informing you of their intent to levy your state tax refund and potentially other assets.
IRS Notice CP504 may also state that the IRS intends to file a tax lien. This 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 — however, there are steps between the lien and the levy that need to take place, such as giving you final notice and offering you a hearing.
Additionally, 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.
What To Do?
The first thing you need to do is read the notice immediately. The notice will state how much you owe and outline payment options. If you agree with the notice you can pay the balance.
If you can pay the balance in full, do so immediately. If you cannot pay the full balance, there are several different options for payment that are available. If you disagree with the notice, contact the IRS and consult a tax professional.
If you choose to agree with the notice, you must pay your balance immediately. If you cannot pay in full or cannot pay by the deadline listed on the notice, you must contact the IRS to set up a payment option. There are several different payment options available.
If You Agree With The Notice
If you agree with the notice you must act immediately. It is much easier to prevent a levy than to remove one if it is already in place. Pay the amount in full if possible. If you decide to make partial payments, the IRS may still levy your refund, however, the amount taken may be significantly less.
In the case that the IRS decides to not only levy your tax refund but your assets, it can make for a difficult financial situation. However, there are limits as to what the IRS can seize, such as assets used to collect income. If you agree with Notice CP504, then you can pay the balance listed in the notice. If you cannot pay in full, you must contact the IRS immediately to set up a payment plan. Here is an overview of the options:
- 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 such as PayPal. If you pay with a third-party payment processor such as Paypal you may be subject to fees. If you cannot pay the amount in full before the date listed on the notice you will have to look at other options.
- 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. With an Installment Agreement, you may also have to agree that the IRS can seize future tax refunds. If you owe over $50,000 in assessed taxes, the IRS may issue a federal tax lien until you complete your payment plan.
- 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). The Collection Statute Expiration Date is typically ten years after the assessment date. When the CSED is reached the remaining balance will be written off.
- 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. This means that the IRS will not try to collect from you, but you will continue to receive an annual bill and any refunds will be applied to your debt. Having your account placed under this status may lead to further implications, and to ensure you understand all the nuances, it is strongly advised you contact a tax professional before applying for Currently Not Collectible Status.
- Innocent Spouse Relief– This is only applicable if you and your spouse filed a joint tax return. To qualify, there may have been an error (or a fraudulent act) made by your spouse or former spouse that resulted in a balance due. The balance due must be related to your spouse’s income and not your own. If you qualify, the IRS will separate the liability and only hold you responsible for your portion of the bill.
- Offer In Compromise– This an exception that allows you to settle with the IRS for less than the amount you owe. This is most often considered after all other options have been considered. An Offer in Compromise is granted regarding a variety of circumstances such as ability to pay, income, expenses, and asset equity. If you think that you may be eligible for an Offer in Compromise, then it is advised that you consult an experienced tax professional.
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.
What 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.
Luckily, there are limits as to what the IRS can seize according to tax codes, but unluckily, there aren’t many. 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 will be issued.
Will the IRS Take My Passport?
In accordance with the Fixing America’s Surface Transportation Act (FAST) legislation, the government has the power to revoke or deny a taxpayer’s passport due to seriously delinquent tax debts. If the taxpayer is currently out of the country, they will be issued a temporary passport to return them to the United States.
If you are in tax debt and apply for or renew a passport you will be issued a letter and notice, informing you of your financial situation. From there, you have 90 days to clear the debt in order to regain your passport. As of 2023, seriously delinquent tax debt refers to unpaid federal tax debt exceeding $59,000.
For a passport to be revoked, the government must also have already filed a tax lien. You are considered to be in seriously delinquent tax debt if this is the balance that remains after the IRS has already seized assets and does not include any amount that you are on a payment or installment plan for.
If You Disagree With The Notice
If you disagree with IRS Notice CP504, contact the IRS immediately via the number shown on your notice. A deadline for filing for an appeal will be listed on the notice, but usually, you have about 30 days from the date the notice was issued.
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. 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.
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 Americans in our local area and nationwide and defend them against the aggressive collection policies of the IRS and the state revenue. Get a 100% free consultation by contacting us online or calling (877) 500-4930.