IRS Notice CP504: The Intent to Levy Letter That Is Not the Final One

What Notice CP504 is and why you received it

CP504 is the notice the IRS is required to send under Internal Revenue Code section 6331(d) at least 30 days before it levies, and you received it because a balance from a return or an assessment went unpaid through the CP14 bill and the CP501 and CP503 reminders. Businesses receive the same notice as CP504B. Here is the actual issue: the title promises more than the letter delivers. Section 6330 says the IRS cannot levy wages, bank accounts or receivables until it has sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing, which arrives as LT11, Letter 1058 or CP90, so the one levy CP504 authorizes is on your state income tax refund. The warning about a Notice of Federal Tax Lien is real, though: a lien filing after CP504 is common, and it carries its own hearing rights under section 6320, covered on our Notice of Federal Tax Lien, Letter 3172 page.

The CP504 deadline and what happens if nothing is done

The pay-by date is about 30 days after the notice date, and if nothing happens by then the IRS can take your state refund, may file a lien, and moves the account toward the final notice that allows wage and bank levies. Nothing dramatic happens on day 31. The account sits in the Automated Collection System (ACS), the IRS call center, or goes to a revenue officer, and either one sends the final notice, LT11 from ACS or Letter 1058 from a revenue officer, which starts a 30-day clock to request a Collection Due Process (CDP) hearing. The gap between the two letters can be weeks or months. The balance also grows faster: interest compounds daily, and under section 6651(d) the failure-to-pay penalty doubles from 0.5 percent to 1 percent per month starting ten days after a notice of intent to levy goes unanswered.

What to do in the first 30 days after a CP504

The first 30 days are for confirming the number, deciding how it gets paid, and telling the IRS before the pay-by date passes. In order:

1. Read the notice against your records and separate tax from penalties and interest, because the penalty line is often the part that can be removed.
2. Pull your IRS account transcript for that year, so you are working from the same numbers the IRS is; missed payments and unfiled returns show up there.
3. File anything that is unfiled. The IRS will not approve a payment plan, hardship status or an offer while a required return is missing.
4. Pick the option below that fits and make the request before the pay-by date. The IRS cannot levy while an installment agreement request is pending under section 6331(k).
5. Keep the notice, the envelope and proof of what you sent, with dates.

Your options after a CP504

Every CP504 balance resolves one of six ways, and which one fits depends on the balance, your filing history and what your finances look like on paper.

• Pay in full. Paying by the date on the notice ends the sequence.
• Short-term payment plan. Up to 180 days to pay in full.
• Installment agreement. Monthly payments under section 6159. Individuals owing $50,000 or less can set one up online without a financial statement, generally over up to 72 months, and businesses owing $25,000 or less can apply online too. Above that, the IRS wants a Form 433 financial statement.
• Currently not collectible status. When the financial statement shows that paying anything would leave you unable to cover basic living expenses, collection stops; nothing is forgiven and interest runs, but the ten-year statute under section 6502 keeps moving.
• Offer in compromise. A settlement for less than the balance under section 7122, on Form 656, accepted when the offer meets what the IRS could collect from your assets and future income. Most offers fail on the math.
• Penalty abatement. First-time abatement removes the failure-to-file and failure-to-pay penalties for one period when the three prior years were clean, and reasonable cause under section 6651(a) covers events outside your control; the request goes in by phone or on Form 843.

Hearing rights are the one thing CP504 does not carry; a CDP hearing attaches to the final notice under section 6330. What you do have is the Collection Appeals Program on Form 9423, a quick review of a specific action such as a state refund levy, with no court review afterward.

What Brotman Law does with a CP504, step by step

We take over contact with the IRS, confirm the balance from the transcripts, remove the penalties that can be removed, and put the resolution in place before the final notice issues.

1. Day one, Form 2848, the IRS power of attorney, goes in, and from then on the calls, letters and deadlines come to us instead of to you.
2. We pull the transcripts for every open year and lay out what is assessed, what is paid, what is penalty and when each collection statute ends; they often show a payment never applied or a penalty that comes off with one call.
3. We file any unfiled returns and check whether an IRS substitute for return under section 6020(b) inflated the balance, since a filed return usually brings it down.
4. We request penalty abatement, then build the financial statement against the IRS Collection Financial Standards, which cap the living expenses the IRS counts, so the proposal is one the IRS can accept.
5. We get the agreement, hardship determination or offer on file, and if the final notice arrives in the meantime, the CDP request goes in inside its 30 days.

Do you need a lawyer for a CP504?

The short answer is, not always: a balance under roughly $50,000, with no revenue officer, no levy or lien and no business payroll tax, can usually be handled with an IRS payment plan you set up yourself. Here is how. Use the IRS Online Payment Agreement tool at irs.gov, file Form 9465, or call the number on the notice, and ask for a monthly amount that pays the balance within 72 months, on direct debit if you can. File every return the IRS is waiting on first, and stay current, since a new balance defaults the agreement. That is the whole job.

A monthly engagement with the firm fits when a revenue officer has been assigned, a levy or a lien is in play, the balance is large enough to need a full financial statement, or the debt is business payroll tax, where the IRS can assess the unpaid trust fund portion against you personally under section 6672. Those files turn on what you show the IRS and when, which is what a lawyer is for.

The monthly flat fee

Many matters like this one run as a monthly flat-fee engagement: one number, agreed up front, that covers agency contact, deadlines, document responses and strategy until the matter resolves. For a CP504 that means the power of attorney, the transcripts, the penalty requests, the financial statement and the payment plan or hardship request, and it covers the CDP request if the final notice arrives while we are working.

Documents to gather

The notice comes first.

• The CP504, its envelope, and every IRS letter before it.
• The return for the year on the notice, and any return still unfiled.
• Three months of bank statements and pay stubs, or a profit and loss statement for a business.
• Monthly figures for rent or mortgage, utilities, insurance, medical costs, car payments and child support.
• Proof of any payment or request you have already sent the IRS, with dates.

Is CP504 the final notice before a levy?

No. CP504 authorizes a levy on a state tax refund only. The final notice is the LT11, Letter 1058 or CP90 under section 6330, which has to arrive before wages or bank accounts can be levied and which carries the 30-day hearing right.

Can the IRS take my bank account after a CP504?

Not on the CP504 alone. A bank or wage levy requires the final notice and 30 more days, except in a rare jeopardy case, which the notice would say. For now the IRS can take a state refund and file a lien.

Can I request a Collection Due Process hearing on a CP504?

No. CDP rights attach to the final notice under section 6330 and to a lien filing under section 6320. For a specific action you believe is wrong, such as a state refund levy, a Collection Appeals Program request on Form 9423 gets a quick review with no court review at the end.

Will the IRS file a tax lien after a CP504?

Often, yes. A lien filing needs only an assessed balance unpaid after the bill; if it happens, Letter 3172 follows within five business days and opens its own 30-day hearing window under section 6320. An installment agreement on direct debit is the most reliable way to head one off.

What if I cannot pay anything right now?

Ask for currently not collectible status. You send Form 433-F, and if the IRS Collection Financial Standards leave nothing after basic living expenses, collection stops. The balance stays and interest runs, but the ten-year statute keeps running, and for some people that is the resolution.

Does CP504B mean the same thing for my business?

Yes, with one difference. When the balance is employment tax, the IRS can assess the trust fund portion, the withheld income tax and the employee share of Social Security and Medicare taxes, against owners and officers personally under section 6672, covered on our trust fund recovery penalty, Letter 1153 page.

Related pages

• IRS collections attorney, the parent page
• IRS Notice CP14
• IRS CP501 and CP503 reminder notices
• IRS Final Notice of Intent to Levy, LT11 and Letter 1058
• IRS revenue officer assigned
• Notice of Federal Tax Lien, Letter 3172
• IRS bank levy and wage levy
• Trust fund recovery penalty, Letter 1153
• IRS passport certification, CP508C
• IRS Form 433 financial statement