If you have received a CP504 Notice of Intent to Levy from the IRS and are concerned about the agency levying your wages and bank accounts or seizing your other assets, Wiggam Law can help you respond to the IRS and assess your resolution options, including payment plans.
A CP504 Notice of Intent to Levy is the IRS’s final reminder that unless you pay your outstanding tax bill, the agency will levy your wages, bank accounts, and any refunds of state income taxes. It is also a notice that the IRS will begin searching for other assets on which it can place a levy, such as your car or home. In addition to levy information, the letter will explain how much you owe and your payment options. Note that if your business owes delinquent taxes, you may receive Notice CP504B when the IRS decides to seize your assets.
How Serious is a CP504?
A CP504 is serious. It is usually sent 30 days before the IRS starts levying your assets. The IRS sends this notice to your last known address, and it may come through certified mail. If you’ve been ignoring other IRS notices, now is the time to pay attention. If you don’t respond to this notice, you will incur consequences.
How Many Notices Does the IRS Send Before Levy?
You may receive as many as four letters, each called a Notice and Demand for Payment, from the IRS before it issues the CP504 Notice of Intent to Levy.
Often, you may not hear anything from the IRS right away when you have unpaid taxes. For example, if you file a return and don’t pay, you may not receive a letter in the mail for months. If you don’t file, you may not hear anything for years. The lack of communication often lulls people into a false sense of security, and they start to think that the IRS may not ever come after them. However, the IRS will almost always follow up on unpaid taxes, even if it takes a while. The IRS has at least ten years to collect the taxes owed, so they can be patient.
You cannot necessarily predict the IRS collection process. Generally, however, once the IRS sends the first notice, the following notices will start to come about every six to eight weeks. After the initial demand for payment, you may get a levy notice in eight to 12 weeks.
What to Do if You Receive CP504
First, note that this letter is serious, and even if you’ve been ignoring other IRS notices, you should not ignore this one. Note the amount of tax and penalties due, and make sure that you understand why you owe that amount.
If you believe that the IRS made a mistake, reach out to a tax attorney as soon as possible. Otherwise, start making a plan to pay your balance or get into good standing with the IRS, as outlined below.
How to Pay Your Tax Bill When You Receive a CP504
In response to the IRS notice CP504, you should pay your unpaid taxes by the deadline noted in the letter or reach out to the IRS. The levy letter will include an envelope, which you can use to mail in your tax payment, or you can pay the balance online.
If you cannot pay the full amount of your tax bill, you should contact the agency. You can use the toll-free number included on your CP504 notice to call and speak to someone about a payment plan. You can also apply for a payment plan or installment agreement online.
As long as you owe less than $50,000, can pay off the balance within six years, and have a history of being compliant with the tax code, the IRS will most likely approve your request for payments. If you owe more than that amount or need longer to pay, you may still be able to set up payments, but you may have to provide extra financial details.
If you cannot afford to make monthly payments, the two main resolution options are negotiating an offer in compromise (OIC) and or having your tax debt be placed in currently not collectible (CNC) status. An OIC is where you pay a lump sum based on your assets and disposable income. CNC is where you prove that you can’t afford to pay anything, and the IRS pauses collection actions against you.
What if You Disagree With the Tax Debt
If you disagree with the amount due shown on your CP504 notice, you have a few different options depending on the situation. Consider the following:
- Incorrect tax assessment – The tax due may be incorrect if the IRS adjusted your tax return incorrectly or audited you. To dispute, you may need to appeal the tax, apply for an offer in compromise based on doubt as to liability, or pay under protest and request a refund. These tend to be the main options, and a tax attorney can tell you the best route in your situation.
- Excessive penalties – You can request abatement of the penalties that the IRS has assessed against you. If you qualify, this can save a substantial amount of money.
- Incorrect interest – The only time the IRS will remove interest from your account is if the interest was assessed in error or if the interest was assessed due to incorrect guidance from an IRS employee.
- Tax debt caused by your spouse – When you file a return with your spouse, you are both liable for the debt. However, if your spouse incurred a tax debt without your knowledge, you may be able to get relief from their portion of the bill. For example, this may apply if they hid income from you and didn’t report it on your tax return or if they claimed deductions incorrectly on the return. This is called the innocent spouse program, and it has strict application requirements.
In this situation, the sooner you reach out to the IRS, the better. Disputing taxes and penalties is easier the closer you are to the assessment. The longer you wait, the more unlikely it can become.
How to Appeal Collection Actions
You can appeal collection actions through the Collection Appeals Program (CAP). The CP504 should outline the instructions for this process.
If you want to appeal through the CAP, reach out to the IRS by the deadline on the notice. Depending on the situation, you may need to talk with your revenue officer’s supervisor. If you cannot reach an agreement with them, you may need to schedule an appeal. Pay attention to the deadlines throughout this process because if you miss them, you may not be able to use this particular appeals process.
The appeals hearing is usually over the phone. During the meeting, you get to explain why you disagree with the IRS levying your assets. Then, you can offer up alternatives such as making monthly payments. In most cases, you won’t be able to avoid having your tax refund seized – unless you can demonstrate that you need the money for a specific purchase. However, if you act promptly, you should be able to avoid having your bank accounts, wages, or other assets seized.
What if You Ignore CP504
If you don’t pay your bill or contact the IRS about a payment plan or other arrangement, the IRS will seize your state tax refund. If the refund covers the full amount of your tax due, the IRS will send you any remaining amount left over. If the refund doesn’t cover the full bill or if you’re not entitled to a state tax refund, the IRS will continue to pursue collections.
Sometime after the CP504, the IRS will send you another intent to levy notice giving you the right to a hearing before the IRS Office of Independent Appeals. If you ignore that letter and do not pay your outstanding balance, the IRS can move forward with the levy.
The IRS can seize or levy your property, or rights to property, including:
- Wages, commissions, and other income
- Bank accounts
- Investment accounts, including most retirement accounts
- Any funds owed to you by other parties, such as people who rent your investment properties, your clients, etc.
- Business assets
- Personal assets including your car and home
- Social security benefits
There is only a small number of assets that cannot be seized by the IRS. This includes Supplemental Security Income and veteran’s payments. The IRS also cannot seize property that doesn’t belong to you. For example, say that your name is on your elderly parents’ accounts. The IRS cannot take that money. If the IRS levies assets in error, contact a tax attorney to help you get the levy removed.
What is the Difference Between CP504 and CP504B?
A CP504 Notice of Intent to Levy is sent to individuals. A CP504B relates to your business tax bill and signifies the IRS intends to seize business assets if you do not pay your outstanding balance.
Get Help With IRS Notice CP504
If you have received an IRS CP504 Notice of Intent to Levy, and you do not agree with your outstanding tax bill, consider scheduling a consultation with one of our tax attorneys to discuss your options for disputing the bill. If you received a CP504 or CP504b and need help with installment agreements or an offer in compromise, our team of experienced attorneys can help explain the processes as well as negotiate with the IRS on your behalf. Give us a call today at (404) 233-9800 or fill out our online consultation form to take the first step toward resolving your IRS debt.