The IRS sends a CP504 Notice when a taxpayer has failed to pay a balance owed.  The CP504 Notice is a Notice of Intent to Levy issued pursuant to Section 6331(d) of the Internal Revenue Code.  If a taxpayer fails to make payments immediately or otherwise address the Notice, the IRS can proceed with a levy on a taxpayer’s income and bank accounts, as well seize a taxpayer’s property or rights to property to satisfy the outstanding balance.

Under §6331(d), the CP504 Notice must be provided to a taxpayer at least 30 days prior to taking action against a taxpayer’s property (unless the IRS has made a finding that the collection of that tax is in jeopardy as described in §6331(a)).

As described in §6331(d)(4), the CP504 Notice must contain certain information, including:

1. A brief explanation of provisions and procedures related to levy;
2. The administrative appeals available to the taxpayer with respect to such levy and sale and the procedures relating to such appeals;
3. The alternatives available to taxpayers that could prevent levy on the property (including installment agreements under section 6159);
4. An explanation of provisions of the Internal Revenue Code and corresponding procedures relating to redemption of property and release of liens on property; and
5. An explanation of the provisions of section 7345 of the Internal Revenue Code relating to the certification of seriously delinquent tax debts and the denial, revocation, or limitation of passports of individuals with such debts pursuant to section 32101 of the FAST Act.

A taxpayer receiving a CP504 Notice should act immediately because certain rights are time-sensitive.  The simplest solution is to simply pay the amount at issue – either in full or in part through an installment agreement or an Offer in Compromise.

If a taxpayer doesn’t agree with the CP504 Notice, they can request an appeal under the Collection Appeals Program (CAP) before the collection action takes place by following the procedures laid out in the Notice.

If a taxpayer receiving a CP504 Notice does nothing, then the IRS can proceed to collect the tax, which can include the filing by the IRS of a Notice of Federal Tax Lien publicly establishing its priority with your creditors. If the tax lien is in place, a taxpayer may find it difficult to sell or borrow against their property and could affect their ability to get credit.  Ultimately, the IRS can proceed to seize/levy the taxpayer’s property, including but not limited to:

1. State tax refunds;
2. Wages, real estate commissions, and other income;
3. Bank accounts;
4. Business assets;
5. Personal assets (including a taxpayer’s car and home; and even
6. Social Security benefits

It’s important to note that the Internal Revenue Service is one of the few creditors that has the right to take personal property like a taxpayer’s personal residence, even despite state homestead laws.  Therefore, it’s very important that a taxpayer receiving a CP504 Notice act quickly to address the situation before it gets worse.

Have a question? Contact Gregory Mitchell.