CP504: the IRC 6331(d) notice of intent to levy, and what it does and does not allow

What the notice means

The IRS notice page says: “This notice is your Notice of Intent to Levy (Internal Revenue Code section 6331 (d)).” IRC 6331(d)(1) allows levy “only after the Secretary has notified such person in writing of his intention to make such levy,” and IRC 6331(d)(2) requires that the notice be given in person, “left at the dwelling or usual place of business of such person,” or sent by certified or registered mail to the last known address, no less than 30 days before the levy, which is why the CP504 arrives by certified mail. The CP504 is how the IRS meets that requirement in the automated notice stream for individual accounts; the business version is the CP504B, which the IRS page describes as the “notice of intent to levy as required by Internal Revenue Code section 6331(d)” for a business balance, with the same 30 days and the same warning that a disqualified employment tax levy or federal contractor levy may follow without a further notice. IRM 5.1.9.3.14 refers to it as the “CP 504 notice or ‘Status 58’ notice.”

A second, separate requirement applies to most levies: the notice of the right to a collection due process hearing under IRC 6330. IRM 5.11.1.3.2 lists what is normally required before property can be levied: notice and demand, notice of intent to levy, notice of a right to a CDP hearing and notice of third-party contact. The CP504 supplies the second item. The CDP notice comes later, usually as the ACS LT11, a revenue officer's Letter 1058, or the CP90 for federal payments.

Why the client got it

The earlier notices (CP14, CP501, CP503) went unpaid and unanswered. IRM 5.2.4.14.3, which defines the notice counts in Collection reports, lists “Fourth Notice: Status 58” after the first notice (Status 21), second notice (Status 20) and third notice (Status 56); IRM 20.1.2.3.8.1.1 identifies the CP 504 by that same Master File status. The IRS page calls it the “final reminder” and says the IRS intends to levy wages, bank accounts or the state tax refund and “will begin searching for other assets on which to issue a levy.” It also explains passport certification under the FAST Act; see passport certification.

Some clients received a CP504 in 2024 or later with no CP501 or CP503 in recent memory. The IRS suspended many automated collection notices during the pandemic and, when it resumed them, sent an LT38 first; the IRS page for that letter says it is “letting you know that during the pandemic some collection notices were suspended” and that the IRS is “resuming normal operations and providing you with an update on your outstanding balance”. The same page notes the automatic failure to pay penalty relief for 2020 and 2021 for assessed tax under $100,000, which should already be reflected in the CP504 balance for those years.

Deadlines and what happens if they pass

The state refund levy runs through the State Income Tax Levy Program. IRM 5.19.9.3.1 requires that each module “must have a previous Status 58 to be included in SITLP,” or a CDP notice transaction. The exceptions are statutory. IRC 6330(f) provides that the pre-levy hearing rules do not apply where the IRS has made a jeopardy finding, “has served a levy on a State to collect a Federal tax liability from a State tax refund,” has served a disqualified employment tax levy, or has served a federal contractor levy, “except that the taxpayer shall be given the opportunity for the hearing described in this section within a reasonable period of time after the levy.” IRC 6330(h) defines a disqualified employment tax levy as one to collect employment taxes where the taxpayer (or a predecessor) requested a CDP hearing on unpaid employment taxes arising in the most recent 2-year period before the period being levied, and a federal contractor levy as any levy on a person who is a federal contractor. IRM 5.11.1.3.2 restates the same four exceptions. For DETL and federal contractor levies through the Federal Payment Levy Program, IRM 5.11.7.3.3.4 confirms that “The issuance of the CP 504 meets the 30-day pre-levy requirement of IRC 6331(d).” In those cases the CDP notice is sent after the levy.

The penalty change is automatic. IRC 6651(d) substitutes 1 percent for 0.5 percent for each month beginning after “the day 10 days after the date on which notice is given under section 6331(d).” See the failure to pay penalty.

An installment agreement reverses the direction. IRC 6651(h) provides that for an individual who filed the return on time (including extensions), the rate in IRC 6651(a)(2) and (3) is 0.25 percent instead of 0.5 percent “for any month during which an installment agreement under section 6159 is in effect for the payment of such tax.” IRM 20.1.2.3.8.1.1 reconciles the two rules: the 1 percent rate applies to penalty months beginning after the status 58 date except during months in which the taxpayer qualifies for the quarter-percent rate, and IRM 20.1.2.3.8.1.2 adds that an agreement already in effect is treated as terminated for this purpose 10 days after the notice of intent to levy. The practical reading is that an individual with a timely filed return who sets up an agreement after the CP504 drops to 0.25 percent per month for the months the agreement is in effect, and the agreement must be requested before the CP504 to avoid the 1 percent months in between. The rate for a corporation or other non-individual stays at 1 percent.

How to respond

1. Calendar the notice date plus 30 days, and the date plus 10 days for the penalty rate change.
2. Confirm the balance on the account transcript and check for unapplied payments, pending installment agreement requests or abatement claims. See reading an account transcript.
3. If the client can pay in full, pay now. The IRS page says “Pay the amount shown on your notice immediately.”
4. If not, request an installment agreement. The IRS page calls the Online Payment Agreement tool “the fastest way to get an installment agreement approved.” The bar is statutory: IRC 6331(k)(2) prohibits a levy while a request for an installment agreement is pending, for 30 days after a rejection (and during a timely appeal of the rejection), while the agreement is in effect, and for 30 days after a termination (and during a timely appeal of it); IRC 6331(k)(1) gives the same protection while an offer in compromise is pending, from the date the IRS accepts it for processing, and for 30 days after a rejection plus any timely appeal. Publication 594 says the same thing in plain terms. See installment agreements and the eligibility tool.
5. If the client cannot pay, gather financial information for a currently not collectible request or an offer in compromise. Publication 594 says the IRS cannot levy if it agrees the levy would cause economic hardship.
6. If the client disagrees, call the toll-free number on the notice. The IRS page also mentions requesting a Collection Appeals Program appeal before collection action takes place, following the notice instructions.
7. Watch for the CDP notice that follows. Its 30-day window is the one that preserves Tax Court review (see LT11 and Letter 1058).

What the IRS does next

If the state refund is levied first, the IRS page says the IRS “may send you a notice giving you a right to a hearing before the IRS Independent Office of Appeals, if you haven't already received such a notice” and can then levy other property: wages and commissions, bank accounts, business assets, personal assets and Social Security benefits. A Notice of Federal Tax Lien may be filed (see federal tax liens). Accounts not resolved move to the Automated Collection System or to a revenue officer. When a revenue officer issues Letter 1058 and no CP504 was issued, IRM 5.1.9.3.14 notes that the letter meets both IRC 6331(d) and IRC 6330.

Related notices

• CP503: the reminder before the CP504.
• LT11 and Letter 1058: the CDP levy notices.
• CP90: the CDP notice for federal payment levies.
• Letter 3172: the CDP notice after a lien filing.

Questions practitioners ask