IRS CP504: IRS Intends To Levy Assets – Meaning & Actions Needed
Are you waiting for a tax refund from your state? If you receive this notice, you may not get the refund. IRS Notice CP504 lets you know the IRS intends to seize your state tax refund. It also states that the IRS may “levy your property or rights to property, and apply it” to the balance you owe. To see what the notice looks like, check out this sample CP504. Then, keep reading for a closer look at what this notice means and what to do if you receive it.
What is IRS Notice CP504?
As indicated above, CP504 is a notification that the IRS plans to issue a levy against your state tax refund. The notice also warns you that the IRS may file a tax lien against you, and if your state tax refund doesn’t cover your entire federal tax amount owed, the IRS may start looking for other assets to seize. The IRS can take your wages, real estate commissions, payments from your clients, bank account balances, business assets, personal assets, and even social security benefits. However, before they can do that, the IRS needs to tell you about your rights to appeal first.
Luckily, you will get another warning (LT11 or L1058) before that happens, which will let you know about your right to appeal. But to be on the safe side, you should try to make arrangements with the IRS as soon as you receive the CP504. As of 2018, this notice may also contain a warning that your passport may be denied or revoked. Usually, the IRS only directs the State Department to deny your US passport if you owe $51,000 or more in taxes owed.
Who Should You Do If You Have Questions?
If you have questions about Notice CP504, you can call the number printed on the notice and speak to an IRS representative. Unfortunately, dealing with the IRS can be intimidating. If you want help talking with the IRS, negotiating a payment plan, or appealing the amount you owe, you should contact a tax professional. Call the number at the top of the page for a free consultation and to learn what the best actions are for your situation.
How Does the IRS Take Your State Tax Refund?
To claim state tax refunds, the IRS uses the State Income Tax Levy Program (SITLP). Generally, your state will also let you know that the IRS is levying your refund. Through the Municipal Tax Levy Program (MTLP), the IRS can also levy refunds from your city or municipal tax program. If you live in Alaska, the IRS can levy your Alaska Permanent Fund Dividend (AKPFD) to cover your federal income taxes owed.
As of 2018, the IRS only levies state and local refunds to cover personal income tax, but the agency may alter the rules and start to claim business refunds in the future. Note that if the IRS already sent you a different notice warning you about levying your assets and advising you of your right to an appeal hearing, you may not receive Notice CP504, but the IRS may still take your state refund.
How Do I Pay?
You can pay your tax bill by detaching the payment slip from your notice and sending it the IRS with a check for the full payment. Make sure to note your social security number, the tax year, and the form you used to file your income taxes on the check. To get your payment to the IRS sooner, you can pay online. If you can’t afford to pay the balance in full, contact the IRS to make arrangements such as the following:
- Installment Agreement — You make monthly payments on the taxes owed.
- Offer in Compromise — You make a partial payment, and the IRS erases the remaining portion of the tax liability.
- Currently Not Collectible (CNC) Status — You show the IRS that you can’t afford to pay, and the IRS agrees to stop collection activity.
Even if you make one of these agreements, the IRS may still levy your state or local tax refund, but that amount will help to lower your tax bill. Additionally, if set up an installment agreement, you may have to agree that the IRS can keep your federal refunds and apply those amounts to your taxes owed. You can also look into Innocent Spouse Relief. Through that program, you establish that the tax amount owed is your current or ex-spouse’s responsibility, and the IRS agrees to stop collection activity on you. Alternatively, you can apply to abate tax penalties, where the IRS decides to reduce or remove failure-to-pay and late-payment penalties on your account.
What Should You Do If You Don’t Agree With the Notice?
Maybe you already paid your tax bill or set up an installment plan. Perhaps you don’t agree with the amount due. Or, potentially, you see another error on the notice. If you don’t agree with Notice CP504 for any reason, you should contact the IRS at the number on the letter, or you should call a tax specialist at the number at the top of our page. Do not ignore this notice. If you don’t take action, the IRS may seize your tax refund and then pursue additional collection activity.