IRS CP504: IRS Intends to Levy Assets — Meaning and Actions Needed

Updated 06/25/2024

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. 

To see this notice, check out the sample CP504. Then, keep reading for a closer look at what this notice means and what to do if you receive it. Here is a recent version of the CP504. 

Table of Contents

• What is an IRS Notice CP504?
• Receiving a CP504 Via Certified Mail
• What Assets Can be Seized by the IRS?
• Additional Related Notices
• FAQs About IRS Notice CP504
• How Does the IRS Take Your State Refund?
• What To Do If You Receive Notice CP504 Notice?
• What Happens If You Don't Respond to a Notice CP504?
• Getting Help with Notice CP504

What is the IRS CP504 Notice?

The CP504 notice is a notification that the IRS plans to issue a levy against your state tax refund or other property. 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. 

Receiving CP504 Via Certified Mail

Generally, the IRS will send CP504 notice by certified mail since they are giving you notice to pay or make an arrangement within 30 days of the notice. Failure to respond generally will lead to a levy. When it is sent by certified mail, they can verify that you actually received this notice. The IRS will mail this letter to your last known address, which is generally the mailing address on your last tax return that was filed.

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.

Key Takeaways

• Understanding IRS Notice CP504: IRS Notice CP504 is a critical alert indicating the IRS's intention to levy your state tax refund and other assets if you owe federal taxes. This notice means that your tax payment is overdue, and you have 30 days to resolve your tax balance to avoid asset seizure actions.
• Immediate Actions Required: Upon receiving CP504, you must act quickly to prevent asset seizure. This includes paying the full amount owed, if it's possible, contacting the IRS to arrange a payment plan, or exploring options like an Offer in Compromise or Currently Not Collectible status if you cannot pay in full, though the IRS will make that determination.
• Assets at Risk: The IRS can seize a range of assets, including tax refunds, wages, bank account balances, and Social Security benefits. However, some essentials for living are protected under tax codes.
• IRS Communication: The notice is usually sent via certified mail to ensure receipt. If you receive CP504, engaging promptly with the IRS or a tax professional is crucial to negotiate payment plans or challenge the tax amount.
• Options for Disagreement or Hardship: If you disagree with the notice, or cannot pay the balance, various options are available. For example, appealing under the Collection Appeals Program, or verifying payment arrangements that you've already made.
• Consequences of Inaction: Ignoring CP504 can lead to the levy of your assets, additional penalties, and interest if the IRS sends you a Final Notice of Intent to Levy. It may also impact your passport eligibility under significant tax debts.
• Seek Professional Help: Dealing with IRS notices can be complex and stressful. Tax professionals can offer guidance, help work out an agreement with the IRS, and ensure the best possible outcome for your situation.

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. For businesses, they will generally send CP504B notice. 
• 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:

Alternative Options to Full Tax Repayment

• 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. For the most detailed information on your current situation, we strongly recommend talking to a tax professional.

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. 

When contacting the IRS or preparing your appeal, be sure to gather and organize all relevant documentation that supports your position. This documentation could include previous tax returns, correspondence with the IRS, payment records, or any other evidence that can help clarify the situation or dispute the balance owed. Being thorough and organized in your appeal can significantly impact the outcome.

If you decide to seek the assistance of a tax specialist, choose someone with experience in handling IRS disputes and a good track record of resolving tax issues. A qualified tax professional can provide guidance on the appeals process, help prepare your documentation, and represent you in dealings with the IRS, potentially leading to a more favorable resolution.

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. 

When Should You Contest CP504?

Contesting a Notice CP504 involves several steps, starting with a thorough review of the notice to understand why the IRS believes you have an unpaid tax debt. The next step is to gather evidence that supports your position. This evidence might include tax returns, proof of payment, or documentation of communication with the IRS.
 

You will need grounds for this contest, which can include but are not limited to: 

• Payment already made: You have proof of payment for the tax debt claimed by the IRS.
• Incorrect tax assessment: Errors in the IRS's calculation or assessment of your tax liability.
• Identity theft: The tax debt is a result of fraudulent activity by another individual.
• Agreement in place: You have an installment agreement with the IRS, or you have already negotiated a settlement.

Once contested, this can result in several different possible outcomes, including: 

• Dismissal of the notice: The IRS may find your evidence compelling and dismiss the unpaid tax claim.
• Adjustment of the tax amount: The IRS may adjust the tax liability if errors are found or if new information is presented.
• Payment plan or settlement: You might negotiate a payment plan or a settlement for less than the full amount owed.
• Continuation of collection efforts: If the IRS upholds their assessment, collection efforts, including liens or levies, may continue.

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.