What Does IRS Notice CP504B Mean?
If you don't pay your taxes, the IRS may send you Notice CP504B. This notice says that the IRS intends to levy (seize) your assets, and it also explains that you may lose your passport. Keep reading to learn what this notice means and to get tips on how to respond.
What Does Notice CP504B Mean?
Notice CP504B means that the IRS plans to seize your assets for unpaid taxes. If you don't pay your taxes or make other arrangements with the IRS by the date on the notice, you can face levies on your wages, bank accounts, and other assets. Typically, the IRS sends this notice to businesses.
The notice will also explain that you may lose your passport if you have seriously delinquent tax debt. In this situation, the IRS certifies your tax debt to the State Department. Then, the State Department can revoke your current passport, refuse to renew your passport, or deny your application for a new one.
As of 2023, seriously delinquent tax debt is $55,000 or over. This number increases annually for inflation. If you lose your passport and then make a payment to get your balance under this threshold, you will still be unable to get your passport back. At that point, you must set up an approved plan with the IRS to get your passport back.
What to Do If You Receive Notice CP504B?
If you receive this notice, you must make arrangements with the IRS, or the agency will start seizing your assets. You can submit payment in full on the IRS's website or mail. If you can't pay in full, consider the following options:
- Request penalty abatement to reduce your total balance due. The IRS waives penalties in many different situations, but generally, you will need to make arrangements to pay the remaining balance before the IRS waives your penalties.
- Apply for a payment plan to pay off the tax in monthly installments. You pay off the full balance in monthly installments with most payment plans. However, if you can't afford to do so, the IRS may let you make monthly payments until the collection statute expiration date and then the agency will waive the rest of the debt. When looking at information about payment plans, note that the rules are different for businesses than for individuals.
- Settle your debt for less than you owe through an offer in compromise (OIC). The IRS will only approve your offer if it's the most you can pay or if you qualify based on effective tax administration or doubt as to liability. OIC approval rates are relatively low, so you should work with a tax professional for the best results. Businesses can generally only qualify for an OIC if they are no longer operating.
- Prove that you can't afford to pay so that the IRS marks your account as currently not collectible. Hardship status temporarily stops collection actions against you. However, the IRS will periodically review your account, and if you can afford to pay, the agency may start collection actions again. Additionally, even if you're on currently not collectible status, the agency can still seize your tax refunds.
Contact a tax professional if you're unsure about the best option for your situation. They can help you identify the best resolution for your situation. They can also deal with the IRS on your behalf. However, you need to ensure that you reach out for help before the date on your notice.
What If You Don't Agree With Notice CP504B?
If you don't agree with the notice, you should contact the IRS or reach out to a tax professional immediately. Here are some of the most common reasons people disagree with this notice and tips on what to do.
- You already paid the tax. Contact the IRS to make sure the payment was applied to your account. Check your bank account to make sure the payment was processed.
- You disagree with the penalties shown on the notice. You can apply for penalty abatement. However, you will still need to make arrangements to pay the remaining balance to avoid a levy on your assets.
- You already set up an installment agreement on the tax liability. Contact the IRS and make sure that your installment agreement was set up correctly. A tax professional can also help you.
- You already established an offer in compromise. The IRS should stop all collection actions once it approves your request for an offer in compromise. Collection actions should also be paused while the IRS reviews your application.
- You think the tax owed was due exclusively to your spouse. When you file a return jointly with your spouse, you are both responsible for the tax due. However, in cases where your spouse, ex-spouse, or late spouse filed a return that understated the tax without your knowledge, you may qualify for relief on the tax bill. You may also need to prove that you didn't benefit from the understatement of tax and that you had no reason to know.
- You disagree with the proposed levy. You can appeal collection actions such as liens and levies through a collection due process hearing. The hearing is typically over the phone. You get to explain why you disagree with the levy, and then you can propose alternatives, such as a payment plan. You must appeal within 30 days of receiving the notice, but if you miss the deadline, you may be able to request an equivalent hearing.
If you disagree with the tax liability, you may still be able to appeal, but it depends on the timeline. However, even if you have missed the window to appeal, you may be able to dispute the tax liability through other channels, such as applying for an offer in compromise based on doubt as to liability. Appealing a tax liability is complicated, and you should work with a tax professional experienced with appeals.
How Long Do You Have to Respond to Notice CP504B?
You must respond by the date on the notice. Typically, this is 30 days after the notice was sent. If you don't pay your taxes in full or have the IRS approve another arrangement (installment agreement, offer in compromise, or currently not collectible), the IRS will move forward with seizing your assets.
What If You Don't Respond to CP504B?
If you don't respond to this notice, the IRS can move forward with levying your assets. The IRS can seize the following:
- Real estate commissions, rental income, and other income.
- Accounts receivables.
- Bank accounts.
- Business assets.
- Social security benefits.
The IRS will also issue a tax lien if the agency hasn't done so already. Federal tax liens attach to your current and future assets. They secure the IRS's interest in your assets, and if you sell them, the proceeds go to the IRS. You also won't be able to borrow against your assets unless the IRS agrees to subordinate the lien.
You will also incur additional penalties and interest on your account. The failure-to-pay penalty gets added to your account every month until you pay, and it can get up to 25% of your tax owed. Interest will continue to accrue on your account until you pay.
How Does the IRS Send Notice CP504B?
The IRS typically sends Notice CP504B through certified mail to your last known address. The IRS can only levy your assets if it sends you proper notice at least 30 days before the levy, and the agency must give you the notice in person, leave it at your usual place of business, or send it by certified mail.
If the CP504B wasn't delivered through certified mail, in person, or at your place of business, the IRS will need to send an additional notice before it moves forward with the levy. The IRS uses several different intent to levy notices.
Difference Between CP504 and CP504B
Both CP504 and CP504B are notices that the IRS intends to levy your assets. Most tax attorneys say that the IRS sends CP504B to businesses and CP504 to individuals. The IRS website has nearly identical information on both forms, and it does not make that distinction.
However, when you open the IRS's pdf samples for these notices, you will see that the CP504B notice has information about business taxes, while the CP504 has information about individual taxes. For instance, the top of the CP504 has a taxpayer identification number, while the CP504B has an employer identification number.
When Will the IRS Start Levying Assets After Sending CP504B?
The IRS may start levying your assets 30 days after sending this notice, but in some cases, the IRS may send an additional notice before it levies your assets. The IRS's website says that Notice CP504B fulfills the intent to levy notice requirements outlined in Internal Revenue Code section 6331 (d). The IRS can levy your assets if you don't respond within 30 days.
IRC 6331(d) states that the IRS can only levy your assets if it does the following: 1) Alert you of a balance due. You will usually get at least a couple of notices about your balance due before the IRS sends a notice of intent to levy. 2) Send you a notice of intent to levy (delivered by certified mail, in-person, or at your usual place of business) at least 30 days before the levy.
However, the IRS's pdf sample notices for both CP504 and CP504B indicate that the IRS may send an additional notice before it moves forward with the levy. In this case, you may receive the CP504B through regular mail rather than certified mail or hand delivery. Then, if you don't respond, the IRS will send another notice, such as CP297 (Intent to Levy Business Assets), and it will levy your assets if you don't respond to that notice by the deadline.
Assets the IRS Can Levy Without a 30-Day Notice
The IRS can seize a few assets without giving you a 30-day notice. The agency can seize your tax refund without sending you a notice if you owe back taxes. The agency also doesn't have to give you notice to seize federal contractor payments.
Additionally, the agency doesn't have to provide advance notice if you're dealing with a disqualified employment tax levy. This applies if you owe payroll taxes and you requested a collection due process on other payroll taxes in the last 24 months.
Finally, the IRS doesn't have to give you a 30-day warning if the collection is in jeopardy. This means that if the IRS believes it won't be able to collect the taxes unless it acts quickly, it can move forward with the levy without sending you advance notice.
If you're dealing with any of these situations, you need to contact a tax professional or the IRS to make arrangements to pay. Once the IRS has seized your assets, you can get them back, but only if you act quickly. This is also much more expensive because, by this point, you will have to pay the costs associated with carrying out the levy in addition to the tax, penalties, and interest you owe.
What Is a Civpen Form?
In some cases, people refer to IRS Notice CP504B as a civpen form. This is short for civil penalty. Generally, this applies if you have received Notice CP504B due to unpaid payroll taxes. The civil penalty for unpaid payroll taxes is one of the largest and most severe assessed by the IRS.
Called the trust fund recovery penalty, this penalty is 100% of the unpaid tax, and it can get assessed to anyone who failed to pay the payroll taxes. For instance, the owner of the company can obviously face this penalty, but if their accountant or bookkeeper chose to pay the electric bill instead of the payroll tax bill, they may also face this penalty.
If you're dealing with a civil penalty due to unpaid payroll taxes, contact a tax professional to help you. The IRS has very specific rules on liability for this penalty. It also has strict rules about allowing businesses to set up payment plans when their tax account balance includes a trust fund recovery penalty.
Get Help With Unpaid Business Taxes
If you receive Notice CP504B, the IRS is getting serious about your unpaid taxes. You must take action if you want to protect your assets from seizure. To get help, use TaxCure to search for a local tax professional in your area. You can also narrow your search results to find a tax pro with experience with your particular tax issue.
When people owe tax debts, they get lulled into a sense of false security because the IRS doesn't send notices immediately. However, once the IRS sends notices, you can no longer ignore the situation. Sometimes, the IRS may take months or even years to send out the first notice, but once they start coming, they typically come every six weeks.
The first few notices tell you about the taxes you owe and outline your payment option. If you ignore these notices, the consequences aren't that severe. Once you get to Notice CP504B, however, the agency is serious, and if you don't respond, you will face collection actions.