On average, the IRS mails about 40 million letters every year. An IRS CP504 B letter is one of the many notices that a business may receive.
This is a very serious notice that you need to read in full. A failure to appropriately respond to this letter could put your business assets at risk. The good news is that there are always ways to resolve your tax situation with the IRS. If you’re feeling unsure about how to move forward, then a tax professional can help.
Learn more about an IRS Notice CP504B, how to respond to it, and how our team of tax experts at Wiggam Law can help you below.
What is an IRS CP504B Notice?
A CP504 notice is a letter from the IRS informing you of their intent to seize or levy your property. Generally, the IRS sends the CP504B to a business with unpaid taxes. In contrast, the agency sends CP504 to individuals with unpaid taxes.
The CP504B is intended to inform a business about the IRS’ intent to seize the business’s property or rights to the property if the business does not respond to the letter within 30 days of the notice date. The Notice will detail the tax form (e.g., 940, 941, 1065, 1120, 1120S, civil penalty, etc.), the tax period, and the associated amount due at issue.
The CP504B states that the IRS may seize your business bank accounts, accounts receivables, and other business assets if you don’t pay the tax owed or contact the IRS to set up a payment arrangement within 30 days of the notice date. In addition to seizing property, the CP504B also states that the IRS can file a Notice of Federal Tax Lien. A separate Notice of Federal Tax Lien letter would be issued if the IRS takes that action. The CP504B also details your rights to request an appeal under the IRS’ Collection Appeal Program and provides potential payment options if the balance can’t be paid in full.
The CP504B notice is never the first notice sent by the IRS. If you have an unpaid tax balance, you should have already received a prior amount-due notice from the IRS. This initial amount due notice outlines the tax due, any failure to file or failure to pay penalties, and any interest that has been assessed so far.
What can the IRS Levy?
As mentioned above, the IRS can seize the business’ accounts receivable and other income, business bank accounts, and other business assets such as property and vehicles to pay off the business tax debt.
What to Do If You Receive a CP504B Notice from the IRS
Did you recently receive an IRS CP504B letter in the mail? If so, then don’t panic. While your tax situation has progressed to a serious level, you still have time to rectify your situation. Before you act, you’ll want to carefully consider the notice, your options, and your best path forward. Here’s what to do after receiving your letter step by step:
Read Your Notice Carefully and Check It for Errors
First, you’ll want to read through your entire notice carefully and completely. Verify that all the information in the notice is correct, including the business’ name, contact details, and information regarding how much the business owes. If you find any errors in the reporting, then the IRS may have sent you the notice in error or made a mistake. To verify how much the business actually owes to the agency, you may need to locate previous financial documents, details, or tax returns.
How to Tell if Your IRS Notice is Legitimate
IRS scams happen when criminals impersonate the tax agency and attempt to collect money from you under the guise of paying off an existing tax debt. If you recently received notices from the IRS, then you might wonder whether or not they’re legitimate.
First, check the letter for accuracy to determine if your IRS notice is a scam. A legitimate IRS CP504B letter should have specific identifying information about your business, such as the business’ Employer Identification Number in the top right-hand corner of the notice. The Employer Identification Number on the letter might only reveal the last 4 digits of the Employer Identification Number. All valid IRS notices will also have a CP504B notice number in the top right-hand corner of the letter as well. This information will appear on each page of the notice. If your letter doesn’t have this number, then it’s likely a scam.
If you notice glaring spelling errors, wrong addresses, or bold, inaccurate claims about your debt, then it could be a scam. If you notice threats about involving the police, then you also know it’s a scam. However, the best way to validate your letter is to speak directly with a tax professional or the IRS.
Consider Your Best Options
If everything in the letter is accurate, then your next step should be to consider your options for repaying what your business owes. If you’re unsure what your options are, get informed before deciding how to best proceed with your business’ tax debt. Below, we’ll go over a general overview of some of the options. Still, it is strongly recommended that you speak with a tax resolution professional who can consider all the circumstances when determining the best option with the IRS.
How to Prevent an IRS Levy
As mentioned, the CP504B letter gives the Taxpayer a warning from the IRS that they could seize the business’ assets and property. If you aren’t making an effort to pay off what you owe or resolve your debt, then the IRS could decide to seize the property to pay off what you owe. The good news is that you can prevent a levy from occurring as long as you take swift action. Here are the main options if you want to avoid a tax levy.
Pay Your Bill in Full
One of the top ways to prevent a levy and ultimately resolve your situation is to simply pay off your entire amount owed to the IRS in full. Please keep in mind that, in addition to the tax owed, you will have to account for any penalties and interest that have accrued when paying the balance in full. The CP504B notice will give you the current tax, penalty, and interest amount.
Negotiate a Payment Plan
If the business cannot pay the balance in full but wants to avoid a levy, it can enter into an Installment Agreement with the IRS. The installment agreement’s length and monthly payment amount will depend on the type of business tax owed and the business’ current financial picture.
When working on payment plan options, please note that the IRS has different guidelines for businesses than individuals. Also, note that there are different rules for businesses that are in operation vs. businesses that are no longer in operation. A tax professional will be able to best assist in determining the available payment plan options.
Prove Your Financial Situation to the IRS
Suppose your business is experiencing a financially distressing situation and cannot afford a payment plan. In that case, there is potentially an option to request that the IRS place the business account into a Currently Not Collectible status. Even if you receive IRS notice CP504B, you still have a chance to prove to the IRS that you’re going through financial trouble and qualify to be placed in a Currently Not Collectible status.
You’ll need to produce proof that shows you can’t pay off what you owe without experiencing financial hardship, so expect to have to submit financial documentation to the IRS before they agree to place the business account in this status. Also, keep in mind that the rules can vary with business assets. If you can prove to the IRS that keeping the business assets will help you earn money to pay off the tax bill, the business may be able to avoid having to liquidate those assets. When you’re getting into these types of complicated arguments, it is best to have a tax professional by your side.
Reduce Your Tax Liability
As you go about resolving your tax situation, there are potential options that can be considered to reduce the business’ overall tax liability. Depending on your situation, you may be able to apply for a penalty abatement request, which could remove some or all of the penalties associated with the business taxes due. You might also be eligible to submit an Offer in Compromise that would allow the business to settle the tax debt for less than the full amount owed. However, please note that an Offer in Compromise with the IRS might not be available for all types of business taxes, so it depends on what is owed as well as the business’ current financial situation.
How to Prevent an IRS Levy in the Future
Preventing an IRS levy from coming to pass in the first place is much easier than getting one released from your property. The best way to prevent an IRS levy in the future is to be mindful of your tax obligations and keep in regular contact with the IRS. Typically, the government won’t be overly aggressive in pursuing what you owe if you continue to work with them and make timely payments when you’ve missed a deadline.
When to Consider Looking for Tax Help
If you recently received a CP504B notice, then you’ve already been dealing with delinquent taxes for an extended period of time.
To move past this issue, it would be in your best interest to hire a tax lawyer who can review your business’ situation and determine all available options before negotiating with the IRS. The tax agency likely won’t be very cooperative, considering you haven’t responded to previous notices about your debt. However, having a tax professional handle your case can immediately strengthen your position.
Are You Ready to Get a Grip on Your Tax Situation?
Are you currently struggling to figure out how to navigate your tax situation after receiving IRS Notice CP504B? Here at Wiggam Law, our tax resolution attorneys focus exclusively on tax law. We help clients like you better understand the IRS tax system, your options for paying off a tax debt, and your best options moving forward.
Since our team has extensive experience negotiating with IRS agents and state tax agents, we know how to advocate for you, even if you’re attempting to negotiate from a weakened position. Let us be your representative so that you don’t have to face the IRS alone. Our top priority is helping you find relief through tax resolution.
To get started on resolving your tax situation, contact us now. We’ll schedule a meeting where we can discuss your tax situation in depth. Call us at (404) 233-9800 or fill out our online consultation form to schedule a meeting with one of our tax attorneys today.