IRS Notice CP504

Ace Plus Tax Resolution: Your Expert Guide to IRS Notice CP504

Since January 2024, the IRS has resumed sending collection notices to taxpayers with unpaidtaxes. After sending a preliminary notice via LT38, they began widely mailing an importantnotice called CP504 starting in March. As a tax professional at Ace Plus Tax Resolution, ouroffice has also seen a surge in inquiries about this CP504 notice.

With this, the IRS may seize your state tax refunds & jeopardy levy without giving you a notice beforehand. Understanding the implications of this notice and taking swift action is essential to protect your financial interests.

What is IRS Notice CP504?

Notice CP504 is an official Notice of Intent to Seize (Levy) stating their intention to seize your state tax refund to address unpaid federal taxes. It also warns that the IRS may levy other assets to apply toward your outstanding balance. Typically sent via certified mail, CP504 provides a 30-day window for you to address your tax debt before the IRS can levy your state tax refund.

Why You’ve Received CP504

If you’ve received CP504, it’s because your tax payment is already overdue. The IRS likely sent previous notices, such as CP14, CP501, and CP503, but received no satisfactory response. CP504 is a critical step in the IRS collections process, signaling that you are running out of time to voluntarily resolve your tax issues.

Understanding the Risks

The implications of CP504 are serious. Beyond claiming your state tax refund, the IRS may seize other assets, including – wages, bank account balances, business assets, personal property, Social Security benefits, other income sources.

Although certain essentials are protected under tax codes, the IRS allowed amount left for living expenses may be significantly less than what most people are accustomed to. The longer the debt remains unresolved, the more aggressive the IRS can become in collection efforts.

Taking Action

Upon receiving CP504, immediate action is crucial. Here are your primary options:

1. Pay in Full: If possible, pay the entire amount due to halt further collection actions and also tostop snowballing penalties and interest. This is the most direct way to stop the process.
2. Installment Agreement: If paying in full isn’t an option, you may negotiate a payment plan with the IRS to pay off your debt over time. At Ace Plus Tax Resolution, we can help you secure a regular or a “partial pay” installment agreement that fits your financial situation.
3. Offer in Compromise: Propose a settlement for less than the full amount owed if you qualify. The IRS may accept a lower amount based on your financial hardship.
4. Currently Not Collectible Status: If you can demonstrate financial hardship, the IRS may temporarily pause collection efforts until your financial situation improves.
5. Penalty Abatement: In some cases, you may be eligible for an immediate penalty abatement, which can reduce the overall amount owed. This option is ideal for those who can show reasonable cause for failing to comply with tax obligations.

Addressing Spousal Responsibility

If you believe that the tax debt is solely your spouse’s responsibility, you may explore Innocent Spouse Relief. This option may halt collection activities against you if you can demonstrate that the liability belongs to your current or former spouse. Innocent Spouse Relief could protect you from being unfairly held accountable for taxes that you were unaware of.

Verifying Payments and Arrangements

It is essential to verify that any payments you’ve made or arrangements you’ve set up are properly recorded by the IRS. Sometimes, notices like CP504 are sent before the IRS processes recent payments or agreements. Double-checking ensures that your account reflects the progress you’ve made toward resolving your debt. A tax professional can help ensure that your records and the IRS’s records are aligned.

Challenging the Notice

If you believe the notice is incorrect or if you’ve already made payment arrangements, contact the IRS immediately. You may have grounds to challenge the notice through the Collection Appeals Program (CAP). CAP allows you to appeal within 30 days of receiving CP504. Before filing an appeal, gather all relevant documentation, including past tax returns, correspondence with the IRS, and payment records. Presenting solid evidence is crucial in disputing the notice or clarifying any misunderstandings about your tax liability.

Consequences of Inaction

Ignoring CP504 can lead to severe consequences. If you fail to respond or make arrangements with the IRS, they may proceed with levying your assets. This can result in:

1. Seizing wages, bank accounts, and other assets.
2. Additional penalties and interest accumulating on your balance.
3. Impact on your passport eligibility, especially for significant tax debt.

In some cases, the IRS may issue a Disqualified Employment Tax Levy or Federal Contractor Levy. These actions can complicate your financial situation even further.

Seeking Professional Help

Navigating IRS notices and negotiating with the agency can be overwhelming. A qualified tax professional can provide invaluable guidance. At Ace Plus Tax Resolution, we specialize in helping clients understand their options, negotiate with the IRS, and find the best path forward.

Consulting with a tax professional is advisable, particularly if your situation is complex or if you’re uncertain how to respond to CP504. We can help ensure that you are taking the correct steps and minimizing the risk of more aggressive collection actions.

Conclusion

Receiving IRS Notice CP504 is serious, but it’s not the end of the road. By understanding your options and taking swift action, you can protect your assets and work toward resolving your tax debt. Whether it’s paying in full, setting up an installment plan, or negotiating a settlement, the key is to act quickly.

At Ace Plus Tax Resolution, we are here to help you navigate the complexities of tax resolution. Don’t wait. Take control of your tax situation today and work toward a resolution that safeguards your financial future.