Help! I Received IRS Notice CP504

 

What to Do If You Receive Notice CP504

Receiving notices from the IRS can be stressful. The letters often use confusing language and outline all of the scary things the IRS can do if you don’t pay. When you have an unpaid tax debt, the IRS usually sends a few letters to remind you about the balance, and then the agency starts sending more serious letters.

CP504 is a serious notice. At this point, the IRS will start enforcing collections against you — this means that because you haven’t paid, the agency will find ways to get the funds without your cooperation. Want help now? Then, contact the Timothy S. Hart Law Group today. In the meantime, keep reading this guide for more information.

What Does IRS CP504 Mean?

IRS Notice CP504 means that the IRS is going to seize your state tax refunds if you don’t pay your bill. The IRS will also seize any federal refunds that you earn. Typically, you receive this notice after CP501 and CP503.

The notice also explains that the IRS may seize other assets if your state tax refund doesn’t cover your bill. If you don’t resolve your tax debt, the agency can take your wages, bank accounts, and other assets including your primary residence, but you’ll receive other notices before that happens. CP504 is a serious notice, and you should respond. However, you don’t need to panic — at this point, the IRS isn’t going to start taking your assets or knocking on your door.

What to Expect If You Receive CP504

What happens next depends on the actions you take. Here’s a look at what to expect based on how you respond to the notice:

• You pay in full — The IRS doesn’t take your tax refund or pursue any other collection actions. No additional interest or penalties are added to your account.
• You contact the IRS to request a payment plan — As long as you meet the criteria such as being compliant with filing obligations, you will generally be allowed to make monthly payments on your tax debt.
• You ask for a settlement — The IRS closely reviews your financial situation to see if they should reduce your balance.
• You request hardship status — The IRS will ask for detailed financial records, and if the agency determines that you truly cannot pay, it will suspend collection actions against you.
• You ask for penalty abatement — The IRS will review the penalties that have accrued thus far, and if you qualify, the agency will remove the penalties. However, if you don’t make payment arrangements, more penalties will continue to be added to your account.
• If you ignore the notice — The IRS will seize your state tax refund. If it covers the debt, you will get any remaining amount. If your refund doesn’t cover the bill, the IRS will send more notices about asset seizures.

If you ignore this notice, the IRS will also increase the penalties on your account—the failure to pay penalty doubles if you don’t respond to this notice within ten days.

FAQs About What to Expect After Notice CP504

There are several different things that can happen after you receive this notice. Here is a breakdown of some of the questions people have.

What if you already paid in full?

If you’ve recently paid in full, the IRS may have sent this notice before processing your payment. If you paid a while ago, the IRS may have lost the payment or credited it incorrectly. In either case, reach out to the IRS to make sure that your account was paid. Have your payment details when you call.

Is the IRS going to file a federal tax lien?

The IRS may file a federal tax lien after sending you CP504. However, the IRS may have filed a tax lien before sending this notice. The IRS can file a tax lien for any level of debt, but generally, it doesn’t do so unless you owe at least $10,000.

Is the IRS going to seize my assets right now?

Notice CP504 states that the IRS may levy your assets, but at this point, the IRS will send you another notice before moving forward with a levy. Before levying your assets, the agency must send you a notice, and the CP504 satisfies that requirement.

However, the agency must also notify you of your right to a hearing, and the CP504 doesn’t do that. So, unless a jeopardy levy is in play, you will receive at least one more notice before the IRS takes bank accounts, wages, or other assets.

What if you disagree with the balance owed?

When you receive CP501 and CP503, they outline what to do if you disagree with the balance due. Essentially, these notices say to call the IRS, and then the IRS will walk you through the process of what to do if you disagree. CP504, unfortunately, does not offer that option. If you disagree with your tax bill, consult with a tax pro for more options.

Does CP504 increase penalty assessments?

Yes, if you don’t pay within 10 days after receiving CP504, the IRS will increase the failure to pay penalty from 0.5% to 1%. For example, if you owe $10,000, the monthly penalty increases from $50 per month to $100 per month. In total, this penalty can get up to 25% of your assessed balance.

Payment Options If the IRS Sends CP504

If CP504 shows a big balance due, you may be wondering what to do if you can’t afford to pay in full. Luckily, the IRS has all kinds of payment options for these kinds of situations. Here are some of the most popular options:

• Streamlined installment agreement — If you owe $50,000, you can set up a payment plan online without providing financial details, and as long as you can pay off the balance within six years, the IRS will let you make monthly payments.
• Non-streamlined installment agreements — You can get monthly payments for up to 10 years (up to the collection statute expiration date), and you don’t have to make a financial statement as long as you owe less than $250,000 and a revenue officer hasn’t been assigned to your account.
• Partial payment installment agreement — You prove that you’re making the highest monthly payments you can afford, and then, when you reach the collection statute expiration date, the IRS waives the remaining balance.
• Offer in compromise — You provide details about your financial situation, and then, if the IRS agrees that you can’t afford to pay the full balance, you pay a reduced amount.

Note that all of these arrangements have qualifying criteria that are not listed above. In particular, in most cases, you can only set up payments if you’ve been compliant with the last five years of paying and filing. With an offer in compromise, you must stay compliant for five years after getting the offer, or the IRS can rescind the agreement.

What If You Can’t Afford to Pay

If you can’t afford to pay, you may be able to qualify for currently not collectible (CNC) status. With CNC, the IRS pauses collection actions — you don’t have to worry about wage garnishments or bank account seizures, but there will be liens against you. To get CNC status, you must prove that paying your tax bill would prevent you from covering basic living expenses or cause financial hardship in other ways.

CP504 Comes From the IRS’s Automated Collection System

The IRS’s Automated Collection System (ACS) sends out CP501, CP503, and CP504. That means that if you’ve received this notice, your account has not yet been assigned to a revenue officer.

You can work that to your advantage, but it has some downsides. The main downside is that if you call the IRS, your call will go to a call center, and a random employee will answer the phone. In contrast, if you have a revenue officer assigned to your account, they personally deal with the situation, and when you call, you talk to them.

However, you can often get a payment plan more easily if you apply before a revenue officer gets assigned. As long as you owe less than $250,000, you can apply for a payment plan without providing a financial disclosure. Once your account gets out of the ACS and assigned to a revenue officer, you almost always have to provide financial details.

Get Help With IRS Tax Debt

Have you received notice CP504? Trying to figure out what to do with your unpaid taxes? Wondering about the next steps? Then, give us a call — that’s exactly what we do for our clients.

At the Timothy S. Hart Law Group, PC, we work closely with our clients to help them find the most affordable, most convenient solutions for their tax problems. We can help you out of whatever situation you’re dealing with.