IRS Notice CP504: What It Is and How to Respond

IRS Notice CP504 is the Notice of Intent to Levy. The IRS typically sends this notice via certified mail.

(In case you don’t know, a levy is when the IRS takes your stuff and in particular your money — such as your wages or the money in your bank account — to satisfy your federal tax debt.)

So the Notice CP504 is the IRS giving you notice that it intends to take your stuff.  The CP504 is one of the most common notices that the IRS sends out to taxpayers — it is typically sent about five weeks after the CP503 Notice and, if not responded to within about five weeks, typically precedes the LT11 Notice.

Here is a sample CP504 Notice.

The CP504 is the notice described in Internal Revenue Code § 6331(d), which requires the IRS — no less than 30 days before a levy — to send taxpayers a notice of its intent to levy the taxpayer that describes “in simple and nontechnical terms”:

• The IRS’s rules pertaining to levy and distraint (i.e., seizure of your property)
• The appeals and other remedies, such as payment alternatives, available to you to prevent such levy
• The IRS’s rules pertaining to the certification of seriously delinquent tax debt to the State Department under Section 32101 of the FAST Act

Now, after sending the CP504 Notice, the IRS can levy certain things. For example, under Internal Revenue Code § 6330(f)(3), if the IRS has served a levy on a state — like California or New York or Florida or Texas — through the State Income Tax Levy Program, the IRS can levy your state tax refund to be applied toward your federal tax debt after it has issued you the CP504.

However, when it comes to other levies, such as wage garnishments or bank levies, the IRS cannot perform those levies until it has sent you an additional notice, your Final Notice of Intent to Levy and Your Right to a Hearing, which is typically found on the LT11 Notice, which is generally sent five weeks after the CP504.

This is all to say that if the IRS levies you without sending you the CP504 or an equivalent notice of intent to levy — as well as the CP14 or an equivalent notice and demand and the LT11 or  an equivalent Final Notice of Intent to Levy and Your Right to a Hearing — the levy is improper and you should contest the levy.

Note, of course, that the IRS may be sending you notices at an old address!

IRS Notice CP504 At a Glance

The NEW IRS Notice CP504, Explained Part by Part

Here is a full explanation of the new (2024 and beyond) Notice CP504, part by part.

Part 1: Final Balance Due Reminder and Notice of Intent to Levy

The large letters to the right of the exclamation point aptly describe the two purposes this notice serves:

• To inform you that you have a balance due, and that this is your final reminder to deal with it.
• To inform you that the IRS intends to levy — that is, seize — your assets and income streams in order to satisfy your tax debt.

Part 2: Amount Due Immediately

The amount in this box is the total amount of taxes, penalties, and interest that you owe the IRS for the year or years covered by this particular CP504 Notice.

Note that this amount may not be the entirety of your tax debt — for example, if you recently filed a tax return showing a balance due, and you have tax debt from older years, the CP504 Notice may only include the balances from older years.

You’ll have to check the “Billing Summary” section further in the notice to know which tax years are included in this particular CP504.

Part 3: What the IRS Wants You to Do Immediately

Next, the IRS tells you (in checkbox format) exactly what it wants you to do immediately, culminating in (of course) making a payment to the IRS.

The items under the “Gather this information” column are the pieces of information you’ll need to make a payment at irs.gov/directlypay, which is what the IRS is instructing you to do in the “Pay directly online from your bank account” column.

Part 4: Consequences If You Don’t Pay Immediately

Next, the IRS tells you what will happen if you do not pay your tax in full by the deadline mentioned previously.

Although there are obviously other consequences of not paying your taxes than those listed here, here are the three listed in this section:

1. Levy

You obviously know this from the heading at the top of the notice, but just in case you forgot, the IRS is informing you here that it “will seize (levy) your property or rights to property if you fail to comply.”

Basically, the IRS is telling you that it can start taking your stuff — and, specifically, your money — if you don’t deal with your tax debt; you are in serious jeopardy of lien or levy if you’ve received the CP504.

2. Filing of a Notice of Federal Tax Lien

Once a tax debt is assessed, the IRS automatically has the legal right to your income and assets to satisfy your tax liability.

This is sometimes referred to as the IRS’s “secret lien.” It’s “secret” because only you and the IRS know about it — unless you tell somebody else about it.

However, the IRS has the power to let everybody else know about your tax debt.

It accomplishes this by filing a notice of federal tax lien (NFTL) in your country and/or state records.

Once that is done, your tax debt officially becomes public record.

Obviously, most people don’t go thumbing through public lien records — so it’s unlikely to affect your public reputation the way a bad social media post would — but interested parties may include, for example, organizations looking to lend you money.

Speaking of bad social media posts…have you seen the IRS Commissioner’s cat? Check out my YouTube video below to see what I mean.

3. Passport Revocation or Denial

If you owe enough in back taxes — the threshold is currently $62,000 — the IRS may prevent you from obtaining or renewing your passport.

It does this by “certifying” your tax debt to the United States Department of State — basically, telling the State Department that you owe a lot in taxes and therefore it should deny any passport applications you submit.

In certain cases, the State Department may even revoke your existing passport.

So if you are outside the United States — or are planning to travel outside the United States in the near future — it’s essential that you deal with your federal tax debt!

Part 5: Other Payment Options

In the next section, the IRS gives you information about ways you can pay the IRS other than paying online directly from your bank account (which it told you how to do in a previous section of your CP504 Notice).

Here are the other payment options the IRS provides:

• Paying online by card at irs.gov/payments
• Paying by check or money order payable to “United States Treasury”
• Paying your balance over time — such as via an installment agreement — at irs.gov/opa

Part 6: Information About Paying by Check

Next, the IRS informs you that when you pay by check, the IRS may, instead of simply depositing the check, make a one-time electronic funds transfer (EFT) from your bank account based on information on the check.

This pay cause the debit to hit your bank account sooner than you may expect if the IRS had simply deposited the check.

The IRS also informs you that the “amount due immediately” previously indicated on the CP504 Notice is only a good payoff amount if you pay it off within the next 21 days (or 10 days if you owe $100,000 or more); the IRS will add additional interest, and may add additional penalties, if you pay after this date.

Part 7: Notice of Intent to Levy

In this section, the IRS gives a fuller explanation than it did previously in the notice of what it means that the CP504 Notice is your Notice of Intent to Levy.

Remember, “levy” basically means the IRS forcibly seizing your assets or cash flow streams in order to satisfy your unpaid tax debt.

But before the IRS does this — before it “levies” you — it must give you sufficient notice.

The table below shows the three notices that the IRS must send you before levying you in its fullest capacity.

The CP504 Notice is a Notice of Intent to Levy — the second kind of notice in the table above. Upon sending this notice, and assuming you have not successfully appealed your installment agreement termination, the IRS may levy your state tax refund.

However, if the IRS has already sent you your Notice of a Right to a Collection Due Process (CDP) Hearing — such as an LT11 Notice — the IRS can levy your other assets and cash flow streams, such as:

• Wages and other income
• Bank accounts and other financial accounts
• Other assets and income streams, including Social Security benefits

Part 8: Notice of Federal Tax Lien

The CP504 has already mentioned this consequence of not paying your taxes, but in case you didn’t catch it the first time, the IRS is reminding you here that:

• The IRS already has a claim against all your property, and
• If you don’t pay the amount due or enter into some kind of resolution with the IRS for your tax debt, the IRS may publicly announce their claim against your property to the world by filing a Notice of Federal Tax Lien in state or county records.

Part 9: CAP Appeal

In this section, the IRS gives you information about how to appeal the IRS’s levy action or filing of a Notice of Federal Tax Lien against you by filing a Collection Appeals Program (CAP) Appeal.

Note that this is different from a collection due process hearing.

Part 10: Your Billing Summary

Next, the IRS provides you with a year-by-year summary of what they believe you owe.

Our client only owed for one tax year, so that’s why he only has information for the tax period ending “2022.”

Here is a quick legend on each of the column’s you’ll see for each tax year:

• Tax period ending: This is the tax period — typically a year but in some cases a quarter — for which you have a balance due.
• Form number: This is the type of tax form you filed (or for which the IRS filed a substitute for return) giving rise to the balance due.
• Amount you owed: This is the amount of underlying tax liability owed on the return when filed.
• Interest: This is the amount of interest the IRS has added to your initial balance.
• Failure-to-pay penalty: This is the amount of failure-to-pay penalty the IRS has added to your initial balance. Note that you may be liable to other or additional penalties than the failure-to-pay penalty, and if so, these penalties would each have their own column here.
• Total: This is the sum of the “amount you owed” as well as your accumulated interest and penalties. Note that our client only owed for one year, so this column is absent.

Part 11: IRS Help

Next, the IRS provides you with various information it believes to be helpful.

The first paragraph provides you with the link for the IRS’s official webpage for Notice CP504. While somewhat hopeful, most of the IRS’s official webpage is a regurgitation of what already appears in the notice itself.

The second paragraph provides you with the phone number for the IRS Balance Due Notice Line (833-678-7020).

In the final two paragraphs, the IRS is informing you that it may reach out to third parties — meaning, people other than you or your authorized representative — to obtain information that it believes is necessary in order to verify information about you and your financial situation and/or to take collection action against you.

Part 12: Taxpayer Rights and Sources of Assistance

In this section, the IRS provides you with some information about the Taxpayer Bill of Rights, IRS Publication 1, Low-Income Taxpayer Clinics (LITC), and the Taxpayer Advocate Service.

Part 13: Penalties

In the next section, the IRS gives you some basic information about the penalties it charges as well as a summary calculation of your penalties by year.

The two most common IRS penalties you may see in this section are:

• The failure-to-file penalty: This penalty is charged by the IRS on taxpayers who fail to file their tax return by the required due date (or extended due date, if the taxpayer filed a valid extension). This penalty is equal to 5% of the tax due shown on the return for every month or part of the month the return is late, up to 25% of the tax due.
• The failure-to-pay penalty: This penalty is charged by the IRS on taxpayers who fail to pay the amount due on their tax return by the required due date (generally April 15 of the following tax year for individual taxpayers). This penalty is equal to 0.5% of the tax due shown on the return for every month or part of the month the return is late, up to 25% of the tax due.

Note that if a penalty has already been included in your assessed balance, it will not appear here; this section is only describing accrued penalties that have not been included in your assessed balance.

Here is a quick legend on each of the column’s you’ll see for each tax year:

• Date to which penalty accrued: This is the date to which the penalty amount calculated in the final column has accrued to.
• Number of months (full or partial) to which the penalty applies: This is the number of months the return has not been filed (in the case of the failure-to-file penalty) or the tax has not been paid (in the case of the failure-to-pay penalty).
• Unpaid tax amount: This is the underlying tax amount per the return that the penalty calculation is based on.
• Penalty rate: This is the penalty rate per month or part of a month.
• Penalty amount: This is the calculated penalty amount; it is the product of the previous three columns (i.e., the amount calculated when they are multiplied together).

Part 14: Interest

In the next section, the IRS provides you with its calculation of the unassessed interest on your account.

For more information about how the IRS calculates interest, read this article.

Part 15: Payment Coupon

At the bottom of the last page of the Notice CP504 is the payment coupon that you would submit with your payment if you intend to pay the amount on the notice in full or in part via paper mail.

The OLD IRS Notice CP504, Explained Part by Part

Here is a full explanation of the old (pre-2024) Notice CP504, part by part.

Part 1: Billing Summary

On the first page of the CP504 Notice, the IRS gives a line-by-line summary of what they believe you owe.

This summary could include:

• The total amount of tax the IRS believes you owe, indicated as the “Amount you owed” line item
• The amount of any tax payments and credits on your account for the year — this is not included in the example image above because the taxpayer did not have any payments or credits on their account during the year
• The amount of any penalties the IRS has assessed on your account
• The amount of any interest the IRS has charged to your account

Part 2: What the IRS Wants You to Do

Obviously, the IRS is sending you this notice because they want you to take some kind of action — namely, pay the amount they believe you owe them within 10 days or at least make arrangements to pay them via an installment agreement.

Part 3: What the IRS Says They Will Do If You Don’t Respond

Next, the IRS lets you know that they will continue to charge penalties and interest on your account until you pay your balance.

They also let you know that they may even file a Notice of Federal Tax Lien on you and may take forced collection activity against you, such as garnishing your wages (up to a maximum amount depending on your filing status and number of dependents) and levying your bank account.

Part 4: Penalties

Next, the IRS lists out the penalties that it has assessed on you with a brief explanation of the penalties themselves.

In this example, the IRS has only charged the failure-to-pay penalty, but other common penalties you may see here are the failure-to-file penalty and the failure to pay estimated tax penalty.

Part 5: Information on Penalty Removal or Reduction

The IRS does allow for full or partial penalty abatement in certain circumstances — in the next section of the CP504 Notice, they provide some basic information about this process.

Part 6: Interest Charges Calculation

Finally, the IRS breaks down the interest they have charged you by quarter.

When the IRS Sends Notice CP504

The most common reason for the IRS sending you a CP504 Notice is when the following things happened:

1. You filed a tax return for the year in question that indicated a balance due.
2. You did not pay the amount due indicated on the return in full.
3. The IRS previously sent you a CP503 Notice and you did not respond to it.

Another situation in which the IRS sends taxpayers a CP504 Notice is if the IRS itself prepared a substitute for return (SFR) for a taxpayer and the tax was assessed based on this SFR.

Or a taxpayer may have paid the balance due indicated on their return when they filed it — but they filed the return or at least paid the tax late, giving rise to penalties and interest that they have not yet paid.

Of course, the IRS is known to make mistakes, and it’s possible they are sending you the CP504 Notice in error because they didn’t properly credit your account for payments you made for the tax year.

What You Should Do If You Receive a CP504 Notice

Below are the steps you should take after you receive a CP504 Notice.

For more information about each of these steps, check out our article How to Fight the IRS and Win.

Step 1: Check the CP504 Notice for accuracy.

Don’t assume that the IRS did their math correctly — review the IRS’s numbers against your own.

Step 2: Correct any errors with the IRS.

If you do find an error in the IRS’s math, take it up with them.

There should be phone numbers in the CP504 Notice itself that you can call to discuss your disagreement with the IRS’s numbers:

• For example, in the “What you need to do immediately” section, there will likely be a phone number that you can call to “discuss your options.”  If you disagree with the tax amount itself, call this number.
• In the “Penalties” section, there should be a number indicated that you can call to obtain a “detailed calculation of your penalty charges.”  If you disagree with the IRS’s penalty calculation, call this number.

You can always reach out to us at at 866-8000-TAX to go to bat against the IRS for you.

Step 3: Seek Penalty Abatement.

For most of our clients with penalties on their account, we at least seek some sort of penalty relief for them.

Sometimes the IRS grants it; sometimes they don’t.

But it’s generally at least worth a shot.

For more information about seeking abatement for the penalties on your account, check out this article.

Step 4: Pay the Balance Due OR Seek Tax Relief

Finally, you have to figure out what to do with the amount you owe the IRS after you’ve cleared up any disagreements with them concerning the amount as well as obtained any possible penalty relief for your account.

You can, of course, pay off your balance in full.  This will (obviously) stop future penalties and interest from accruing.

However, a better option — if you qualify for it — is an offer in compromise.  An offer in compromise is an agreement you make with the IRS in which the IRS agrees to accept a lower amount to satisfy your tax debt than you actually owe.

That said, not all taxpayers qualify for an offer in compromise, so there are other options, such as a temporary hardship placement called currently not collectible status as well as installment agreements for taxpayers who wish to pay their balance over time.

For an overview of how tax relief works, read our article What Is Tax Relief and How Does It Work?.

IRS Notice CP504 FAQs

Here are some frequently asked questions about IRS Notice CP504.

What If I Already Paid the Amount on My CP504 Notice?

If you’ve already paid the amount indicated on your CP504 Notice, you can disregard the notice.

In fact, the IRS says in the “What you need to do immediately” section:

“If you’ve already paid your balance in full within the past 14 days or made payment arrangements, please disregard this notice.”

In this case, it’s possible that the IRS had already generated the CP504 Notice before it had processed your payment.  This is not a big deal — it will simply take the IRS a few days (or even a couple weeks) to catch up.

What Comes After CP504?

IRS Notice LT11 typically comes after CP504.

Can You Still Get an Installment Agreement After Receiving a CP504 Notice?

Yes, you can still get an installment agreement after receiving a CP504 Notice.

However, what the IRS really wants is for you to pay everything you owe them right now — or at least as much as they can get from you right now.

So if you receive a CP504 Notice and you call up the IRS to set up an installment agreement, and they have the authority to levy your bank account and garnish your wages, they’re not really highly incentivized to let you go on some you know nice, long-term installment agreement especially if they know you have assets and a high disposable income.

And that’s where firms like Choice Tax Relief come in to negotiate a more workable installment agreement even after somebody has received the CP504 Notice.

And if you’re in really bad financial shape you may even qualify for some hardship-based resolution such as a partial-payment installment agreement.

You may qualify for currently not collectible status.

You may even qualify for an offer in compromise, which is in agreement with the IRS to settle your tax debt for less than you owe.

By the time you receive the CP504 Notice, your situation is pretty serious, but you can still enter into an installment agreement with the IRS even after receiving this notice.

Do businesses receive a CP504 Notice?

No, businesses do not receive a CP504 Notice from the IRS.

The business equivalent of the CP504 Notice is the CP504B Notice.

Author:

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Logan Allec, CPA, Founder and Owner

Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.

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