IRS Notice CP504

What Is Notice CP504?

Notice CP504 is a follow-up to previous notices sent by the IRS to remind you of your unpaid taxes and your obligation to pay. This isn’t a notice to take lightly—the IRS is informing you that they intend to exercise their legal right to collect what you owe by seizing your assets. 

Breaking Down Your CP504

The CP504 notice includes your SSN, the date of the notice, and other important information in the top corner. This makes it easy to verify that the notice was intended for you. The notice states how much you owe, and then breaks it down into the initial amount owed, penalties, and interest charges. 

The rest of the notice gives you information on what to do if you agree with the amount owed, what to do if you disagree with the amount owed, what they may seize if you do not respond, and how you can pay. The notice also indicates that they have sent a copy to your spouse if you are married.

The Path to an Intent to Levy Notice

If you have received Notice CP504, it should not be a surprise to you that you owe the IRS money and that they are becoming increasingly insistent about collecting it. This is because the CP504 comes after several other notices reminding you of what you owe. 

However, if you read reports from taxpayers online, there are those who have not received prior IRS notices and are then blindsided by CP504. It’s possible for the earlier notices to be lost in the mail or unintentionally delivered to another house.

The notices that come before CP504 include:

• CP14: Notification of balance due that requests payment within 21 days
• CP501: Follow-up to previous letters requesting payment; generally requests payment within 21 days
• CP503: Second reminder that you have unpaid taxes for the year in question; gives you 21 days to make payments

These notices all look fairly similar in structure, due date, and amount requested—although by the second and third notice, you will have higher interest charges to pay. It’s important to recognize that these are all separate notices increasing in severity, not duplicates of one notice that you can ignore.

What Happens After You Receive the Notice

The IRS gives you 30 days to pay your taxes in full, come to a payment arrangement with the IRS, or otherwise take action to address what you owe. If you do not respond within this timeframe, they will likely move forward with a levy. 

You should watch out for a Final Notice of Intent to Levy and Notice of Your Right to a Hearing, LT11. This looks similar to past notices but is clearly more urgent, stating “Intent to seize your property or rights to property.” You may also receive Letter 1058, also known as a Notice of Intent to Levy and Notice of Your Rights to a Hearing. It’s labeled as your Final Notice and requests an immediate response. Both forms inform you of your right to request a Collection Due Process hearing or Equivalent Hearing, during which you can appeal the levy action. 

If you do not take any action on LT11 or Letter 1058, the IRS can move forward and seize your:

• Wages or other income
• Bank accounts
• Business assets
• Personal assets, including vehicles and real estate
• Tax refunds
• Social Security benefits

What About the Pause in Collections Notices?

If you owed taxes before or during the COVID-19 pandemic, you may have heard that the IRS temporarily suspended its collection efforts. This allowed taxpayers who were already financially suffering the effects of the pandemic to get caught up. However, in January of 2024, the IRS began resuming its collection efforts on accounts that were paused during the pandemic. 

Affected taxpayers should have received LT38, a notice indicating that the IRS is attempting to collect the amount owed. It provides the amount due and different payment options.

How to Respond to a CP504 Notice

Your next steps depend largely on whether or not you agree with the amount you owe. Not sure if the amount is correct or not? That’s normal—when people fall behind on their finances, it’s common to not keep track of what is owed to whom. At that point, it’s worth talking to a tax attorney like you’ll find at McLaud Law P.C. who can help you interpret your tax returns, determine how much you truly owe, and come up with a game plan.

If You Agree With the Amount Due

If the IRS is correct about how much you owe, you have multiple options. Of course, you can always pay the amount owed in full by the due date—but if that were an option, you likely would have already paid. Your options depend largely on your financial situation, and having an experienced tax resolution professional can help analyze your options and ensure you get the best possible treatment.

Options you may wish to explore include:

• Installment agreement: The IRS would rather collect what it’s owed over a long period of time than never recover it at all. You can apply for a short-term payment plan, which lasts up to 180 days, or a long-term payment plan, which lasts up to 72 months. As long as you stay up-to-date on your payments, you do not have to worry about your assets or income being levied.
• Offer in Compromise: If you’ve put off handling your tax debt because the amount overwhelms you, you’re not alone—it’s easy to look at a five or six-digit debt and not know how to approach it. If your income is such that you cannot afford to pay off your tax debt, even with a payment plan, it may be time to consider an Offer in Compromise. Your offer should reflect what you genuinely can pay, otherwise the IRS will likely reject it. This allows you to settle your debt for less than you owe.
• CNC status: You may also qualify for Currently Not Collectible status if your income is low enough that you cannot afford to pay anything toward your tax debt. This does not eliminate your tax debt; it grants you relief from having to make payments toward it. The IRS does request information periodically to determine whether or not you can resume payments.

If You Disagree With the Amount Due

You should take immediate action—the clock is ticking and delaying could result in you losing your income, home, assets, and tax refunds. It is far easier to prevent a levy than to remove an existing one, so be proactive about this.

You can move forward with a Collection Due Process hearing. This hearing gives you the chance to explore other collection options and dispute the amount owed if you disagree with it. Once you are at this point, it is strongly recommended that you work with a tax attorney. You’ll need to navigate this process carefully.

At McLaud Law, we understand that receiving notices from the IRS can be incredibly stressful. If you’ve received CP504 and you’re panicking about your financial future and stability, we’re here to help. Call us at 585-397-7785 or fill out our online contact form to set up a consultation. 

We’ll take an in-depth look at your tax situation, all the communication you have received from the IRS, and come up with a plan that tackles your tax debt and gets you back on track.

FAQ

What’s at risk if I receive a CP504 notice?

If the IRS does not receive a response, they may send their final notice and then levy your assets. This may include your income, funds in your bank accounts, your vehicles and home, tax refunds, and other personal property.

How long do I have to respond to a CP504 notice?

You generally have 30 days to respond to CP504, but it is heavily recommended that you respond as quickly as possible. It takes time to apply for a payment plan, prepare an Offer in Compromise, or otherwise address your tax debt, so you do not want to wait until the last moment.

Can I set up a payment plan?

If you meet the requirements set out by the IRS, you may be approved for a short-term or long-term payment plan. You can apply online to find out what your payments would be and how long they would last.

What if I can’t pay any part of my tax debt?

If you can’t pay even a portion of what you owe, you may qualify for Currently Not Collectible status. This temporarily pauses collection actions until you have enough disposable income to pay in full or pursue a payment plan.

Can I negotiate a settlement?

You may be able to settle your tax debt with an Offer in Compromise, although that depends entirely on your financial circumstances and how much you are willing to pay.

What happens if I don’t agree with the amount owed?

Your next step is to request a CDP hearing. This hearing gives you the chance to dispute what the IRS claims you owe.

What will happen if I ignore this notice?

The IRS will likely move forward with levies if you ignore this notice and subsequent final notices. Your home, vehicle, and other assets will be at risk—do not ignore this notice.

This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between McLaud Law P.C. and the recipient.