What is a CP504?
If you haven’t paid your taxes, you might receive something called a CP504 from the IRS, which is essentially a notice reminding you to pay up.
Dealing with unpaid taxes can be a daunting situation, and receiving a CP504 notice from the IRS only adds to the stress. Also known as a Notice of Intent to Levy, this formal reminder demands prompt payment. Ignoring a CP504 can have serious consequences, including asset seizures, federal tax liens, and impact on credit and borrowing. In this article, we’ll explore what a CP504 entails, what steps to take if you receive one, and the potential repercussions of ignoring it. Understanding your options and taking proactive measures can help navigate this challenging situation.
Here’s what you should and shouldn’t do if you get one and what happens if you ignore it.
What should I do if I get a CP504 notice?
First, read the notice carefully to make sure you aren’t missing anything crucial and that your total balance due hasn’t increased substantially since the last time you checked it. (If you’ve been putting off paying your tax debt for a while, the IRS might have levied additional penalties or interest.)
Double-check to make sure the amount due on the CP504 is correct. If you haven’t calculated your taxes yet, make sure that it’s at least in the right ballpark.
How Bench can help
If you’ve received a CP504 notice from the IRS and aren’t sure how to verify your unpaid balance or even where to start, the experts on our Bench Retro team can help.
Our Retro support gives you a dedicated team of historical bookkeeping specialists to make sure your prior financial records are complete and accurate, putting you in a better position to respond to the IRS and move forward with your business.
We can also help you enlist support to deal with the IRS. A tax professional from one of our trusted tax resolution partners can help you navigate the CP504 notice and any taxes owed from it. Book a free consultation to learn how we can help you navigate your CP504 notice.
How Long How Long Do I Have to Act Before Levies are Enforced?
Once you understand your position with the IRS, you have three options:
If you agree with the balance
If you agree with the balance stated in the CP504 notice, pay the amount within 30 days of receiving CP504. Failing to do so gives the IRS the authority to initiate a levy on your state tax refund, using it to offset the unpaid balance.
If you agree but can’t pay the full amount
Pay what you can immediately, then get in touch with the IRS to set up a payment agreement. There are payment options available as part of the IRS Fresh Start program. If you qualify, you’ll pay in more manageable monthly installments rather than one up-front lump sum.
If you disagree with the notice
If you disagree with the amount on your CP504, it’s a good idea to get in touch with a tax resolution company like our friends at 20/20 Tax Resolution.
If your books are incomplete, the IRS’s estimation of your balance owed could still be incorrect. In many cases, a tax resolution partner can help you sort out your finances and lower your balance.
What’s the difference between a CP504 and CP504B
The IRS issues both CP504 and CP504B notices as warnings of potential asset levies. While the IRS website doesn’t explicitly differentiate between the two, tax attorneys generally believe that CP504B is sent to businesses, while CP504 is for individuals. When examining the sample notices provided by the IRS, CP504B contains information pertaining to business taxes, while CP504 focuses on individual taxes. Both notices signify the IRS’s intent to seize assets and may result in bank account levies and wage garnishments. Failure to pay the outstanding balance can lead to a Federal Tax Lien, which can create difficulties in borrowing, selling property, and professional licensing.
What else you should do if you get a CP504 or CP504B?
Double-check your tax account
Visit the IRS’s View Your Tax Account portal. Here, you’ll find information about any payment plans you currently have in place with the IRS, previous payments you’ve made towards your balance, penalties and interest you’ve accrued, and any other unpaid taxes you might have missed. Double-check your balance and make sure you and the IRS are on the same page.
Read up on payment arrangements
Ignoring an unpaid balance because you think it’s simply too large? Instead, consider reading up on and reaching out to the IRS about a payment arrangement. These can make repayment much more manageable and remove a huge layer of stress from the process.
Explore your options
Visit the IRS’s payment options page for links to their Direct Pay portal (which allows you to pay directly from your bank account), debit and credit payment options, as well as information about paying via the Electronic Federal Tax Payment system, Electronic Funds Withdrawal, same-day wire, check or money order, or cash.
Consider requesting an appeal
When you receive a CP504, it means the IRS will soon initiate collection actions. Once that happens, it becomes much harder to file an appeal under the Collection Due Process (CDP).
If you think there might be anything wrong with the CP504 you’ve received from the IRS, make sure to request an appeal or get in touch with a tax resolution firm *before *the IRS collection process begins.
What happens if I ignore a CP504?
The short answer? Nothing good.
Getting a Notice of Intent to Levy doesn’t just mean that the IRS thinks you might have forgotten to pay your taxes. It also means they’ve started searching for assets to levy (i.e. seize) in order to pay that balance.
Avoiding or ignoring a CP504 for 30 days usually results in a levy on your state tax return. If you delay longer than that, the IRS will start looking at other assets like your bank accounts, wages, business assets, social security benefits, and property (i.e. vehicle and home).
If you ignore your CP504 long enough, the IRS might also file a separate notice called a Notice of Federal Tax Lien. This will notify other creditors (i.e. people or institutions you’ve borrowed from and owe money to) that the IRS has priority to your current and future assets, and it could affect your credit score and your ability to borrow in the future.
If these consequences aren’t enough of a deterrent, it can still get worse. If you’re seriously delinquent (meaning you owe more than $54,000 in back taxes), it could affect your ability to apply for or renew a passport with the State Department. There are some exceptions to this: the IRS will not identify someone as “seriously delinquent” if they have declared bankruptcy or have an installment agreement request pending.
I’m still confused. Who should I contact?
If you have any questions about the notice, call the toll-free number printed on your CP504 to speak to a customer service representative from the IRS.
Remember, when the IRS sends a CP504, they’re often working with an estimate of what the business owner may owe, and those estimates tend to aim high. If you’re behind on your taxes and haven’t done your bookkeeping, it pays to get started now and see where exactly you stand.
The prospect of contacting the IRS can be a little overwhelming, so it makes sense if this option feels daunting. If you need some additional support, you may want to seek help from an enrolled agent at a tax resolution company, a CPA, or a tax attorney. These advisors can help with several aspects of your tax issues, including representing you before the IRS.
Bookkeeping services like Bench’s Retro bookkeeping team can also help small business owners catch up on their books and make sure they’re tax-ready. Our team can help you identify hidden deductions that will lower the amount owed to the IRS or put you in touch with our network of trusted tax resolution professionals.
What if I’ve already paid my balance, disagree with the notice, or have any other issues with CP504?
Whether you agree with the balance printed on your CP504 or not, getting help as soon as possible is often the best way to go. A tax resolution partner can help you or a member of the Bench Retro team can help point you in the right direction. They’ll be able to clear up any confusion around payments, answer questions you have about repayment, and double-check to make sure the IRS hasn’t made any errors on their end.