Notice of Intent to Levy (CP504)

This is the most misunderstood notice in the collection sequence, in both directions. The CP504 itself permits the IRS to take your state tax refund: "we can seize ('levy') any state tax refund to which you're entitled." For most other property, the IRS states that if a balance remains after the refund seizure, it "may send you a notice giving you a right to a hearing before the IRS Independent Office of Appeals" and can then levy other property. In practice that means wages, bank accounts, and business assets generally require one more notice, a final notice with Collection Due Process rights such as the LT11, Letter 1058, or CP90.

The failure-to-pay penalty normally runs at 0.5% per month. The IRS states that if you do not pay within 10 days of a notice of intent to levy, the rate becomes "1% per month or partial month." On a large balance, that doubling is real money every single month, on top of daily compounding interest. The escalation math is laid out in our guide to penalties and interest.

Per the notice itself, the IRS can take your state refund, file a public lien that "can affect your ability to get credit," and issue the final notice that puts wages, bank accounts, Social Security benefits, and business and personal assets in reach. The CP504 also carries the passport warning: federal law "generally prohibits the State Department from issuing or renewing a passport to a taxpayer with seriously delinquent tax debt," a certification that arrives as a CP508C. For founders, a lien filing at this stage is often the moment tax debt stops being private, because it surfaces in any serious lender or investor diligence.

Everything still works at the CP504 stage, but the clock now matters:

• Pay or get into an installment agreement before the file escalates to a final levy notice. See the payment plan guide for thresholds and setup.
• Appeal before enforcement through the Collection Appeals Program. The IRS confirms you can "request an appeal under the Collection Appeals Program (CAP) before collection action takes place." CAP is fast, but its decisions are final and cannot go to Tax Court.
• Open a settlement track with an offer in compromise or hardship status if the numbers genuinely do not work; a pending offer generally pauses levy action while it is reviewed.
• Dispute the liability by calling with transcripts and proof if the balance is wrong.

If a CP504 has already arrived, this is the right moment to get a professional read on the whole account, because the next notice starts a rigid 30-day statutory clock. A free consultation with a resolution specialist on our team maps the options against your actual transcripts.