How To Respond To A CP504 Notice In North Or South Carolina

In this article, you will discover:

• What a CP504 is and why you would receive one
• What happens if you ignore a CP504 notice in the Carolinas
• The most common mistakes in responding to a CP504 notice in the Carolinas

What Is A CP504 Notice From The IRS, And Why Might A Taxpayer In The Carolinas Receive One?

CP504 is a notice from the IRS warning of their intent to seize your property or state tax refund for your unpaid tax balance.

The IRS started sending out a lot of CP504 notices after the pandemic ended. Following that, North and South Carolina were under a hurricane-related disaster relief collection hold by the IRS. However, at the beginning of this year, taxpayers started getting bombarded with these notices again.

CP504 notices are one of the systemic notices issued by the IRS after a balance is assessed and not paid. They are generally generated by the system and not an actual human. It’s one in a series of notices issued before the IRS can start forced collection, seizing assets, taking state tax refunds, or taking wages, bank accounts or other property.

A CP504 notice has a 30-day timeframe to respond. It’s a sign that the IRS is starting to get aggressive with collections, and you need to start addressing your tax matter immediately, if you haven’t already.

How Serious Is A CP504 Notice, And What Happens If I Ignore It?

If you receive a CP504 notice, you’re far into the collection process, and you need to take some immediate action to deal with it. By that point, the problem is not going to go away.

If you choose to ignore the notice, the IRS will then send what’s called a Final Notice of Intent to Levy. This notice is serious. It gives the taxpayer collection due process rights, which, for the most part, must be provided before actually issuing a bank levy or wage garnishment. It is important to consider exercising those rights within the required time period.

The IRS will also have the authority to issue a federal contractor levy through the Federal Payment Levy Program (FPLP). Suppose you were contracted with the government to receive any sort of government funds. You could be anybody, from a US postal worker to a medical practice that receives Medicare funding. In that case, the IRS can immediately garnish and levy payments coded as federal payments without even having to give you those due process rights. The FPLP can also apply to individuals who receive federal payments from most any source.

After receiving the CP504, if you’re a federal contractor receiving federal funds, you don’t receive due process rights like every other individual taxpayer. And since FPLP levies are issued by a computer at the IRS, it is difficult to obtain quick relief. So, prompt attention to the CP504 is needed before the government issues the FPLP levy.

What Are The Most Common Mistakes To Avoid When Responding To A CP504 Notice?

Ignoring a CP504 is the first mistake. It’s best to make some type of agreement with the IRS. As a taxpayer, you need to know your options at this stage. It’s critical to talk with a tax attorney to review everything and see what your options are to resolve the balances.

Suppose you decide to just call the IRS to ask about the notice. They are trained to ask a ton of questions, personally and financially, that you most likely are not prepared to answer. They will then establish a strict timeline to provide those responses with supporting documentation. We talk to many clients at this stage who are overwhelmed and do not know where to start.

A tax attorney knows precisely what the IRS is looking for. They can help you gather information and present it to the IRS in a more positive way that will be accepted and reviewed with the client’s best interest.

You also may not know your appeal rights for specific notices with the IRS. If a notice includes certain appeal rights, your tax attorney can ensure those appeal rights are exercised and preserved.

How Can A Tax Attorney Help Me Respond Effectively To A CP504 Notice?

Often, you may come to your tax attorney with only two weeks to respond, having talked to the IRS after receiving a CP504. That puts a big time crunch on the attorney because it magnifies the enforcement action by the IRS.

When the IRS starts docketing dates that require some response, attorneys who deal with tax resolution know how to address this. They know what to do on the CP504, whether or not it needs to be responded to immediately because of that deadline.

Receiving the CP504 may necessitate taking a moment to decide the best way to resolve that notice. For instance, it could entail gathering up some financial information before contacting the IRS to determine what the best options might be to resolve the entire debt. It may be that you need to get into compliance before the CP504 can be addressed properly.

Your attorney is also looking to see whether you received a final notice with due process rights. That’s where the enforcement kicks in to high gear. If so, they will know how to respond.

Notes From The Field: What Role Does Negotiation With The IRS Play In CP504 Cases You’ve Worked On?

When you receive a CP504, you’re far along in the collection process. That situation requires a lot of negotiation about:

• What problems are you facing?
• What are your best options?
• What’s your best collection alternative?
• Do I need to get into compliance by filing missing returns?
• Can you make a payment?
• Can you get into an installment agreement?
• Do you qualify for an offer?
• Will you have any money at the end of the month?

Maybe you’re in a hardship or non-collectible status. These are the issues you will eventually negotiate. It may not be only in response to years noted in the CP504, but to the whole debt and the whole collection enforcement matter.

We joke that the CP504 notice is the first “mean” notice the IRS sends when you file a return with a balance owed. The first few notices are very polite, stating that you have a balance due, and please get in touch with the IRS.

The messages get increasingly more aggressive. Often, clients will bring in a CP504 notice because it’s the first message that mentions a levy or a lien. It scares them, and it should.

It’s the first threatening notice a taxpayer gets, and it opens their eyes a little bit to where they see they must deal with this because it’s not going to go away.

Still Have Questions? Ready To Get Started?

For more information on CP504 notices in the Carolinas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (803) 771-9800 for our South Carolina office or (980) 677-1099 for our North Carolina office today.