Problem Statement:
Receiving a CP504 notice from the IRS is a serious matter. By this point, the IRS is stepping up its efforts to collect unpaid taxes. Ignoring this letter could lead to drastic consequences. So, what is a CP504 notice, and what should you do if you receive one?
What is a CP504 Notice?
A CP504 notice is a final reminder from the IRS before they begin more aggressive collection actions. Most likely to place a levy on your property. It’s called a “Notice of Intent to Levy”. It means the IRS is planning to seize assets (wages, bank accounts), to satisfy the debt. It also means the IRS has sent you earlier notices like the CP14 and CP503. You either ignored or did not fully address.
This notice also informs you that the IRS may file a federal tax lien, which puts a legal claim on your property as security for the debt. This can significantly impact your credit rating and make it difficult to sell or refinance your property.
Why Did You Receive a CP504 Notice?
You received a CP504 notice because you owe the IRS money and haven’t responded to previous notices or made arrangements to pay. The IRS is notifying you that they plan to start taking more serious collection actions if you don’t resolve the debt soon.
The CP504 also warns you that if you have an unpaid balance of federal taxes, the IRS will seize your state tax refund and apply it toward your federal tax debt. This is one of the first steps in the IRS’s levy process, so it’s crucial to act quickly.
Steps to Take After Receiving a CP504 Notice: 
- Review the Notice and Amount Owed
Just like with other IRS notices, the first step is to carefully review the CP504. Ensure that the IRS’s calculations are accurate and that the balance listed matches your own records. If you believe there’s an error, contact the IRS or a tax professional immediately to dispute the amount. - Pay the Full Amount or Set Up a Payment Plan
If the amount is correct, it’s important to pay as soon as possible to avoid further penalties or collection actions. If you can’t pay the full amount, you have options. The IRS offers installment agreements that allow you to pay your debt in monthly payments. You can apply for a payment plan online or by contacting the IRS directly. - Request a Temporary Delay in Collection
If you’re facing financial hardship and can’t make any payments right now, you can request that the IRS temporarily delay collection. This is known as being placed in “currently not collectible” status, and it will give you more time to get your finances in order. However, interest and penalties will continue to accumulate during this time. - Consider an Offer in Compromise
If paying your full tax debt is impossible, you may be eligible for an Offer in Compromise (OIC). This is an agreement with the IRS to settle your tax debt for less than the full amount you owe. To qualify, you must meet certain financial criteria, and the IRS will evaluate your ability to pay before accepting your offer. - Act Quickly to Avoid a Levy or Lien
The CP504 notice gives you a short window of time to take action. If you don’t respond or arrange payment, the IRS will move forward with levying your assets. A levy allows the IRS to seize your wages, bank accounts, and other property. In addition, they may file a federal tax lien, which can damage your credit and limit your financial options.
What Happens If You Ignore the CP504 Notice?
Ignoring a CP504 notice is extremely risky. If you don’t take action, the IRS will begin to levy your assets. This could include garnishing your wages, seizing your bank accounts, or even taking your home or other property in extreme cases. The IRS may also file a lien, which could hurt your credit and make it hard to obtain loans or sell your property.
Conclusion:
The CP504 notice is a final warning from the IRS before they begin serious collection actions. If you receive one, don’t delay—review the notice, confirm the amount owed, and take immediate steps to resolve your tax debt. Whether that means paying the full amount, setting up a payment plan, or exploring other options like an Offer in Compromise, acting quickly can prevent further financial hardship. If you’re unsure about your next steps, consider reaching out to a tax professional who can help you navigate the process and avoid severe consequences.
