IRS Notice CP504 Explained - 2023 Updates

There are several types of IRS notices you should be on the lookout for when you check your mail, and CP504 is certainly an important one. This notice serves as a final warning to taxpayers that they owe money to the IRS before other actions are taken to move forward with the collection due process.

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Key Takeaways:

  • The IRS CP504 Notice is the IRS Final Notice letter you will be sent in the mail regarding an unpaid tax balance before the IRS takes further action against your account to collect tax payments.
  • If taxpayers fail to pay their tax balance on time, IRS Notice CP504 informs the taxpayer about the intent to levy their assets, such as wages, property, or tax refunds, in order to secure tax payments.
  • Individuals can respond to a levy by either paying what they owe in taxes or if they cannot afford to pay their tax liability, they can negotiate with the IRS to settle for an installment agreement or offer in compromise.

What Is CP504?

The CP504 Notice, also referred to as Final Notice, is an IRS correspondence that you may receive in the mail if the IRS has yet to receive payment for the tax balance that you owe. Within this notice, the taxpayer is able to see the most updated tax balance, including the related accrued fees, penalties, and interest, along with the instructions about when this payment is due and how to submit payment. If you are unable to make this payment by the designated due date, you may be subject to further collection efforts by the IRS.

This Final Notice by the IRS is also a Notice of Intent to Levy your assets, as per Internal Revenue Code Section 6331 (d).

Why Does The IRS Send Notice CP504?

The IRS sends out Notice CP504 to taxpayers who have yet to pay what they owe in back taxes to provide them with the final opportunity to pay off their debt before further collection efforts are initiated.

What Does 'CP504 Intent To Levy' Mean?

In the case that taxpayers receive the IRS Final Notice CP504 in the mail, it is important that they understand what an IRS levy is and how it can impact their tax account. The CP504 Final Notice warns taxpayers that if they fail to pay their tax balance, the IRS will seek alternative methods of securing tax payments by levying their assets.

An Intent To Levy notice is a legal letter from the IRS that warns the taxpayer that if they do not pay their tax liability, they will move forward with the process of levying their wages, bank accounts, or tax refund to secure payment for the debt that is owed. Tax liens describe the process of following through with seizing the aforementioned assets.

The IRS and other collections agencies can issue their claim to seize payments through a variety of levies, including a tax levy, bank levy, asset levy, and more, and then, if there is still a failure in receiving the tax payment, they can move to seize the assets via a federal tax lien.

How To Respond To CP504

If you receive Notice CP504 from the IRS, it is imperative that you do not ignore this message as further action is required. Here are the steps you must follow if you receive CP504 in the mail:

1. Read the notice carefully.

The first step to take when you receive an IRS letter in the mail is to read the details of the notice extremely carefully. Within the notice, you will be able to access all information about your tax balance, when it is due, and how to move forward with making a payment or negotiating with the IRS.

2. Submit your payment.

The next step to take upon receiving IRS Notice CP504 is to submit a payment for the tax debt balance you owe to the IRS. There are several ways in which you can submit a payment to the IRS, including paying via direct deposit using your bank account, paying online or over the phone using your debit card or credit card, registering to pay online for free using EFTPS (Electronic Payment Federal Tax System), sending a check or money order through the mail, or paying in person at your local IRS office.

Paying off your tax balance in full is the best way to halt collection efforts by the IRS and fully resolve your tax issues. If you cannot afford to pay your balance in full, you can work out a payment plan with the IRS to help you manage the process of paying off your back taxes.

3. Negotiate with the IRS.

If, upon receiving CP504 from the IRS, you realize that you cannot afford to pay off your full tax balance to solve your tax debt, there are solutions you can take to resolve your situation with the IRS without impacting your ability to pay for your essential living expenses.

There are several options that you can consider when trying to negotiate your tax balance, such as the IRS Fresh Start Program. Other standard options for resolution include installment agreements and offers in compromise.

Installment Agreement

If a taxpayer finds themselves unable to pay their full tax balance, the IRS may permit them to pay back their tax debts in the form of payment plans, or installment agreements. Upon this agreement, the taxpayer will submit monthly deposits to the IRS based on whichever payment arrangements are approved by the IRS. 

An installment agreement is a beneficial form of tax relief for taxpayers because it allows them to work toward paying their tax bill without accruing additional financial stress due to the additional payment responsibility.

Offer in Compromise

While offers in compromise are rarely accepted by the IRS, this form of tax relief can be the most helpful form of tax relief in allowing taxpayers to solve their tax burdens. If the IRS approves an offer in compromise, they essentially agree upon a sum the taxpayer could reasonably afford to pay without causing additional economic hardship. 

This settlement amount allows the taxpayer to overall pay less in taxes than they initially owed as long as they comply and submit the agreed-upon settlement amount.

If you receive IRS Notice CP504 in the mail, it is essential that you make your response as soon as possible.

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