IRS Notice CP504: What It Means and How to Respond

Receiving a notice from the IRS can be alarming, and IRS Notice CP504 is no exception. The CP504 is a final reminder from the IRS that your tax debt has not been paid, and it's one step before they take serious collection actions, such as seizing assets or garnishing wages. Let’s break down what this notice means, why you received it, and what you need to do next.

Call Turner Business Solutions at (316) 285-0125 if you received an IRS notice. You can also schedule a free consultation online.

What is IRS Notice CP504?

IRS Notice CP504 is a “Final Notice of Intent to Levy” and a “Notice of Your Right to a Hearing”. Essentially, it’s a warning that the IRS intends to collect unpaid taxes through more aggressive measures, like seizing your assets or placing a levy on your state tax refund. At this stage, the IRS is giving you a final opportunity to pay your tax debt before they take enforcement action.

The notice typically indicates the following:

• The amount of unpaid taxes you owe.

  
  

• Additional penalties and interest that have accumulated.

  
  

• The IRS’s intention to levy your state tax refund and potentially take other collection actions.

  
  

It's crucial to take this notice seriously, as it’s one of the last steps before the IRS begins seizing assets.

Why Did You Receive IRS Notice CP504?

You received IRS Notice CP504 because you have unpaid taxes, and previous notices (such as CP14 or CP501) have gone unresolved. The IRS sends out several notices regarding unpaid taxes before issuing this final warning. If you did not pay or respond to earlier notices, the IRS escalated the matter, leading to the issuance of the CP504.

In many cases, people overlook or ignore earlier IRS notices, leading to more serious consequences. By the time you receive a CP504, the IRS is ready to take further action, but you still have time to avoid more serious consequences if you act quickly.

What Should You Do After Receiving Notice CP504?

1. Review the Notice Carefully: Make sure to read the CP504 notice in its entirety. It will detail the amount of unpaid taxes, interest, and penalties that you owe. The IRS may also outline what actions they intend to take if you do not respond.

   
   

2. Verify the Debt: Double-check the amount the IRS claims you owe. Compare it to your own records or prior notices to ensure accuracy. Sometimes the amount owed can include penalties or interest that you weren’t aware of, or there might be an error.

   
   

3. Pay the Balance or Set Up a Payment Plan:

   
   

   • If You Can Pay in Full: The quickest way to resolve the issue is to pay the full balance due. This can usually be done online through the IRS website, by check, or using other accepted payment methods.

     
     

   • If You Can’t Pay in Full: If you can’t afford to pay the full amount right away, you still have options:

     
     

     • Installment Agreement: You can apply for a payment plan, allowing you to pay off the balance over time.

       
       

     • Offer in Compromise: In some cases, you might be eligible to settle your tax debt for less than the full amount owed.

       
       

     • Temporarily Delay Collection: If you’re experiencing financial hardship, you may qualify for a temporary delay in the IRS's collection efforts.

       
       

4. Request a Collection Due Process Hearing: The CP504 notice states your right to a hearing before a levy is enforced. If you disagree with the IRS’s actions or need more time to resolve the matter, you can request a Collection Due Process (CDP) hearing. This must be done quickly — you typically have 30 days from the date of the notice to request a hearing.

   
   

5. Consult a Tax Professional: If the situation feels overwhelming or you’re unsure how to proceed, consider consulting a tax professional or a tax attorney. They can help you negotiate with the IRS, set up a payment plan, or explore options like an Offer in Compromise.

   
   

Consequences of Ignoring IRS Notice CP504

If you ignore the CP504 notice, the IRS will likely move forward with their collection efforts. Here are some of the potential consequences:

1. Levy on Your State Tax Refund: As the CP504 notice states, the IRS can take your state tax refund and apply it to your federal tax debt.

   
   

2. Federal Tax Levy: The IRS can move beyond seizing your state tax refund and start levying (seizing) your assets. This may include:

   
   

   • Bank accounts

     
     

   • Wages (wage garnishment)

     
     

   • Personal property

     
     

   • Retirement accounts

     
     

3. Lien on Your Property: The IRS may also place a federal tax lien on your property, which can impact your ability to sell or refinance your assets and damage your credit score.

   
   

4. Additional Penalties and Interest: The longer your tax debt goes unpaid, the more penalties and interest will accrue, increasing the total amount you owe.

   
   

How to Avoid Future IRS Collection Notices

Here are some steps to help prevent situations like receiving a CP504 in the future:

• File and Pay Taxes on Time: The simplest way to avoid IRS collection actions is to file your taxes on time and pay any balance due promptly.

  
  

• Respond to IRS Notices Quickly: If you receive any IRS notices (like CP14 or CP501), respond as soon as possible. The earlier you address the issue, the less likely it will escalate to a CP504.

  
  

• Set Up Payment Plans Early: If you know you can’t pay your taxes in full, set up a payment plan with the IRS right away. Don’t wait for the IRS to take action.

  
  

• Keep Accurate Records: Ensure that you maintain accurate financial and tax records. This will help you if there are discrepancies or if you need to prove your case to the IRS.

  
  

Conclusion

IRS Notice CP504 is a serious warning that should not be ignored. While it’s not the final step the IRS can take, it’s one of the last opportunities you have to resolve your tax debt before the IRS begins seizing your assets. By taking immediate action—whether by paying the balance, setting up a payment plan, or requesting a hearing—you can avoid further complications and keep your financial situation under control.

If you’re unsure how to proceed, don’t hesitate to seek help from a tax professional, who can guide you through your options and ensure you take the right steps to resolve your tax debt.

Call Turner Business Solutions at (316) 285-0125 if you received a CP504 notice and need assistance. You can also schedule a free consultation online.