The IRS has a specific process if they are trying to collect unpaid back taxes from business owners or individual taxpayers. The CP504 – Intent to Levy State Tax Refund or Other Property should be the fourth notice you receive regarding delinquent taxes.
Before you receive a CP504 notice, the IRS will send a:
CP501 – IRS Standard Tax Bill (First Notice)
CP502 – Balance Due Reminder Notice
CP503 – Second Reminder About Unpaid Taxes
The IRS delivers all correspondence via registered mail with a signature required.
If you somehow missed all these notices, decided to ignore them, or just don’t have the money to pay your back taxes and are now in a panic, don’t worry. Yes, a CP504 form is serious and the language used may sound harsh, but you still have time to pay your delinquent taxes or otherwise take action.
If you receive a CP504 form, you should take action immediately. Don’t wait or procrastinate, because back taxes don’t go away on their own. However, even though the IRS has filed the notice of its intent to levy your state tax refund or other property, no levies or liens have been placed on your funds or properties yet.
If you have the money to pay your outstanding back taxes, pay the bill online, immediately, by ACH direct debit through your bank account or using a debit or credit card. Additional fees may apply if you use a card, but they will be less than the consequences you’ll face if you ignore this important tax notice.
You can also pay your late taxes by check or money order using the enclosed payment coupon and mailing it to the address listed on the bill. If you mail the payment, it’s a good idea to call the number on the CP504 notice so the IRS can halt further collections.
As tax forms go, a CP504 form is serious business. The IRS plans to issue a levy against your state tax refund and seize the money to cover your unpaid federal taxes.
If your state tax refund doesn’t cover the whole amount of past due taxes, the IRS could start searching for other assets to levy, which could include bank accounts and property. The agency can levy your wages, 1099 income, business assets, your car and home, and even social security benefits to collect your past due balance.
The IRS may also file a Federal Tax Lien on your property. This gives the IRS permission to seize the property – and future property you may purchase – if you try to sell it. It can be extremely difficult to sell real estate with a tax lien on it.
Finally a CP504 notice gives the IRS permission to revoke your United States Passport, which can make it impossible for you to leave the country by land, air, or sea. If you don’t have a passport, the IRS can deny your application if you have a CP504 filed against you.
With such high stakes and so much at risk, it’s crucial to consider all your options to pay your taxes. Can you use a credit card? Take out a personal loan? Borrow money from a friend or relative? Take out a home equity loan or use a home equity line of credit?
Virtually any solution, aside from a high-interest pay day loan, will allow you to pay off your IRS back taxes at an interest rate lower than the IRS is likely to offer – and with less hassle, too.
When you factor in the cost of a tax attorney to negotiate an installment agreement, as well as any interest and penalties that may continue to accrue plus the fees associated with an IRS installment agreement, negotiating with the IRS may be a last resort to pay your taxes.
If you can secure a low interest loan, you’ll preserve your credit rating, stop any liens or levies, and give yourself a fresh financial start.
Realistically, not everyone has the credit or collateral to secure a loan to pay delinquent taxes. If you receive a CP504 and cannot pay the bill in full, it may be time to seek help from a tax professional.
A tax expert can assess your financial situation and help you file an offer in compromise, which would lower your overall tax bill and give you more time to pay, or an installment agreement so you can pay off your debt with low monthly payments.
Tax experts understand the language to use and the evidence to provide to successfully convince the IRS to accept an offer in compromise or agree to an installment agreement. They may also be able to have fees and penalties waived, further reducing the total amount you owe.
If you receive a CP504 Notice of Intent to Levy State Tax Refund or Other Property do not ignore it.
Let Solvable help you find a tax expert to help you deal with unpaid back taxes so you can get a fresh financial start.