CP504 Notices

A CP504 is the IRS telling you that a balance is overdue and that it intends to levy. It reads like a final warning, and in one respect it is: after a CP504 the IRS can take your state tax refund without further notice. For anything else it owns, another notice with appeal rights has to come first.

What a CP504 lets the IRS do

The notice is the intent-to-levy notice required by section 6331(d). Once it has been sent, the IRS may seize a state income tax refund and apply it to the federal balance. It may also file a Notice of Federal Tax Lien, which is public and affects credit and the sale or refinancing of property.

What it does not do is authorize a levy on wages, bank accounts or other property. That requires a separate notice, a CP90, LT11 or Letter 1058, which carries the right to a collection due process hearing. Many taxpayers panic at a CP504 and pay something they cannot afford; others ignore it because nothing happens right away. Both are mistakes.

How to use the time

A CP504 usually arrives several weeks before the final notice. That window is the best time to fix the problem on your own terms, because once the final notice issues the options narrow and the clock shortens to 30 days.

1. Confirm the balance is right. Notices sometimes reflect penalties that can be removed or payments that were misapplied.
2. Get any missing returns filed. Nothing else can be resolved while a return is outstanding. See back taxes.
3. Choose a resolution: full payment, an installment agreement, an offer in compromise, or currently-not-collectible status if you genuinely cannot pay.
4. Set it up before the final notice arrives, so the levy never issues.

If you cannot pay

Inability to pay is not ignored by the IRS, but it has to be documented. An installment agreement stops enforced collection while it is in place. Where income barely covers necessary living expenses, the account can be placed in currently not collectible status and levies stop, though penalties and interest continue and the lien may remain.

The IRS collections overview explains the full sequence from first notice to levy, and where each intervention fits.