A CP504 notice from the IRS is a formal warning indicating that you have unpaid federal taxes and the IRS intends to seize your state tax refund or other assets to satisfy this debt. This notice is typically sent after multiple prior attempts to collect payment, including CP14, CP501, and CP503 notices, signaling that the IRS is escalating its collection efforts.
Why the IRS Sends a CP504 Notice
The CP504 notice is part of the IRS’s due process to balance tax collection with taxpayer rights. Before the IRS can levy your property — such as bank accounts, wages, or your state tax refund — they are required by law to send this notice, informing you of their intent to levy and providing a deadline to respond, usually 30 days from the notice date.
What Does Receiving a CP504 Mean?
Receiving this notice means the IRS believes you owe back taxes, interest, and penalties based on prior assessments. They have already sent prior notices requesting payment. The CP504 sets a serious tone that if you fail to respond, the IRS will move forward with levying your assets without further warnings.
How the CP504 Process Works
- IRS Assessment: The IRS determines you owe a tax debt.
- Preliminary Notices: The IRS sends CP14 (tax bill), CP501 (reminder), and CP503 (second reminder) notices.
- CP504 Notice Issued: This notice formally warns of intent to levy your state tax refund or other property.
- Response Window: You have about 30 days to respond, pay, or negotiate.
- Levy Enforcement: If unresolved, the IRS can seize your state tax refund and later pursue other assets.
Important Points About a CP504 Notice
- The CP504 does not immediately authorize levies on wages or bank accounts; for those, the IRS must send a separate Final Notice of Intent to Levy (Letter 11), which includes rights to a Collection Due Process (CDP) hearing.
- The CP504 usually precedes the levy of your state tax refund without further notice.
Common Reasons for a CP504 Notice
- Unpaid tax balances from underreporting income or missed payments.
- Tax liabilities after audits or adjustments.
- Defaulted or expired IRS payment plans.
- Non-filing or failure to respond to previous notices.
Who Receives CP504 Notices?
This notice can be sent to any taxpayer with unpaid federal tax liabilities who has not resolved the debt or established a payment agreement with the IRS, including individuals, self-employed persons, and business owners.
What to Do When You Receive a CP504 Notice
- Do Not Ignore the Notice: Failure to respond can lead to immediate IRS levies.
- Review the Notice Carefully: Confirm the tax period, amount owed, and deadlines.
- Verify the Debt: Check your records and request a tax transcript from the IRS if needed.
- Contact the IRS Quickly: Use the contact information on the notice to discuss payment options or dispute inaccuracies.
- Explore Payment Solutions: Consider installment agreements, short-term payment plans, offers in compromise, or currently not collectible status. Learn more about the IRS Payment Plans.
- Seek Professional Assistance: Consult a tax professional, such as an enrolled agent or tax attorney, especially if the debt is large or complex.
Avoiding Common Mistakes
- Don’t delay responding, as the window to act is limited.
- Don’t assume all assets will immediately be seized; levies typically start with state tax refunds.
- Don’t ignore potential relief options; the IRS offers several paths to resolve tax debt.
- Verify the legitimacy of the notice by contacting the official IRS hotline at 1-800-829-1040 if in doubt.
Related IRS Notices and Terms
- CP503 Penalty Collection Notice
- Tax Levy
- CP504B Notice: Intent to Levy on State Tax Refund
- Offer in Compromise (OIC)
FAQs
What distinguishes a CP504 from an initial CP14 notice?
CP14 is an initial tax bill for unpaid taxes. CP504 is a later, more serious notice warning of intent to levy assets.
Can the IRS take my state tax refund with a CP504?
Yes. The CP504 explicitly informs you that your state tax refund may be seized.
How long do I have to act on a CP504?
Typically, you have 30 days to respond, pay, or negotiate.
What if I ignore the notice?
The IRS can proceed with levies on your state tax refund and eventually other assets.
Can I appeal a CP504 notice?
Appeals are generally tied to a separate final levy notice (Letter 11), but you can still dispute or negotiate after receiving a CP504.
Sources:
- IRS. “Understanding Your CP504 Notice.” irs.gov, accessed June 2025.
- IRS. “Taxpayer Bill of Rights.” irs.gov, accessed June 2025.
This comprehensive guide is designed to help taxpayers understand and effectively respond to a CP504 notice to avoid escalated collection actions by the IRS.