IRS CP504: IRS Intends to Levy Assets — Meaning and Actions Needed
Are you waiting for a state tax refund? If you receive Notice CP504, you may not receive your refund.
IRS Notice CP504 alerts you that 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.
What is IRS Notice CP504?
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.
When you receive this notice, your tax bill is already late, and you have 30 days to pay. If you don't pay within 30 days, the IRS can seize your tax refund and other assets.
What Assets Can the IRS Seize?
If you owe delinquent taxes, the government has the right to seize your assets to cover the bill. In addition to taking your state or federal tax refunds, 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.
Fortunately, tax codes prevent the IRS from taking some property or tools used to derive income, for example, the tools you use for your small business. The IRS also must leave taxpayers with a few essentials for housing, clothing, and transportation.
Although the IRS has to leave you with some money for living expenses, the allowable amount is very small. For most people, it's much less than they live on. When you receive notice CP504, you need to act quickly to prevent the IRS from taking your assets. Once a wage garnishment or levy is in place, it can be very difficult to remove.
Additional IRS Notices
If you have unpaid taxes, the IRS will send you several different notices. Typically, the notices come in the following order:
- CP14 — This is typically the first notice you receive if you have unpaid taxes.
- CP501 — If you don't respond to CP14, you will usually receive this notice.
- CP503 — If you don't take action, the IRS will send this reminder about your unpaid tax balance.
- CP504 — The IRS intends to levy your assets and the agency will start by taking your state tax refund.
- CP90, LT11, or Letter 1058 -- These letters serve as the IRS's Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
After sending Notice CP504, the IRS will claim your state refund, but the agency will send an additional notice (CP90, LT11, or LT 1058) before taking other assets. To prevent the IRS from taking other assets, you should act quickly after you receive CP504.
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.
Questions About IRS Notice CP504
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. Use our site to contact a tax pro 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 2022, the IRS only levies state and local refunds from personal income tax returns, but the agency may alter the rules and start to claim business refunds in the future.
What to Do If You Receive Notice CP504
If you receive IRS Notice CP504, the actions you should take vary based on your situation. Here is a breakdown of what to do if you receive CP504.
If you agree with the balance due and can pay in full
Detach the payment slip from your notice and send it to 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 agree with the balance due but cannot pay in full
If you can’t afford to pay the balance in full, contact the IRS or work with a tax pro 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.
- Penalty Abatement — The IRS removes penalties from the account, and then, you make arrangements to pay the remainder of the balance.
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 you 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.
If you believe the tax bill was solely your spouse's responsibility
Look into Innocent Spouse Relief. If you can establish that the tax amount owed is your current or ex-spouse’s responsibility, the IRS will agree to stop collection activity on you.
If you already paid your tax bill or made arrangements
If you already paid your tax bill, contact the IRS and make sure that the agency received your payments. If you made other arrangements, make sure the IRS has a record of them. The agency may have sent the letter before the arrangement. But you should double-check to ensure the IRS hasn't overlooked your payment or set up an arrangement on the wrong account.
If you aren't sure about the amount due
Set up an online account with the IRS and order a tax transcript. This will show you the amount you owe plus any payments made on your account. A tax professional can help you assess if the bill shows the correct amount due.
If you disagree with the notice or the amount due
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 from our directory. To request an appeal under the Collection Appeals Program (CAP), call the IRS directly or send Form 9423 (Collection Appeals Request within 30 days of receiving the notice.
If the IRS has suspended collection action on your account
If you have already received a notice that the IRS has stopped collection actions on your account due to financial hardship, you can ignore Notice CP504 if your financial situation has not changed. This is the only situation where you can ignore CP504.
Note that when the IRS pauses collection action on your account, the bill does not disappear. If your financial situation improves, the IRS will resume collection activity.
What Happens If You Ignore Notice CP504?
If you ignore Notice CP504, you will face collection actions. Again, if you don't pay the bill in full in 30 days, the IRS will take your tax refunds. The IRS may also serve a Disqualified Employment Tax Levy (tax levy to collect payroll taxes) or a Federal Contractor Levy (tax levy on federal payments issued by the Bureau of Fiscal Service),
Before seizing other assets, the IRS will typically send an additional notice notifying you of your right to request a Collection Due Process hearing. However, if the IRS has already sent this notice, it can seize your assets sooner.
As of 2022, 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 $52,000 or more in taxes owed.
Additionally, penalties and interest will continue to accrue on your account. Making arrangements with the IRS typically stops penalties and reduces the interest that accrues on your account.
Get Help With Notice CP504
If you received Notice CP504, you should take action before the situation gets worse. You may not be able to stop the IRS from taking your tax refund, but if you act quickly, you can stop the IRS from levying other assets, seizing your passports, or taking other serious collection actions.
To learn more, contact a tax pro today. They can help you protect your assets and get the best result possible for your situation.