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IRS CP504 (Intent to Levy) - What are my Options

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(New York State)

Like a total idiot I have been procrastinating the filing of my taxes for various inexcusable reasons. The last year I filed was 2011. Due to a 1099-K filed in my name for 2014, the IRS has assessed me a huge tax bill because they do not have the offsetting expenses. They finally caught up to me and through notice CP504 demand that I pay the amount due or they intend to levy or seize my property, and I have 30 days to respond.

I know that this is not actually the final, formal action to levy, but I am unclear as to my options. They do give me the option to negotiate a payment plan, which doesn't help me much because I don't actually owe this huge amount of money.

My most pressing question - is it too late to file? Can I mail in my returns right now for 2012, 2013, and 2014, will they accept it, and if so what is the correct procedure?

I really hope the course of action is not to go to court, please help! Thank you in advance
 


PayrollHRGuy

Senior Member
We have some very good tax professionals of various stripes on this forum and I'm sure one will be along shortly.

Good news you probably won't have to go to court because they don't need to take you to court to take collection actions against you.

I would start getting all the old returns done. Have you filed for 2015-2018?
 
We have some very good tax professionals of various stripes on this forum and I'm sure one will be along shortly.

Good news you probably won't have to go to court because they don't need to take you to court to take collection actions against you.

I would start getting all the old returns done. Have you filed for 2015-2018?
Thank you for your comments. No, I have not filed for 2015-2018, but i do have a notice demanding I file for 2017. This is finally the kick in the pants I need to get everything done, but I assume I need to file returns in sequential order. If allowed to do so, I would like to file this week for 2012-14, and follow up shortly after with 2015-18
 

PayrollHRGuy

Senior Member
Personally, I would clean up all my problems at once. This is especially true if you are going to be asking for a payment plan. You need to know the total amount you owe them.
 

davew9128

Junior Member
Filing those returns will go a long way to reducing the tax owed assuming the correct tax is less than what IRS assumed. Yes you are allowed to file, legally you are required to.
 

davew9128

Junior Member
Good news you probably won't have to go to court because they don't need to take you to court to take collection actions against you.
However if a CDP hearing is timely requested contesting the collection action, an adverse decision leaves the possibility open to file a petition in US Tax Court if it shown the settlement officer made a material error of fact or engaged in abuse of process. It's rare but it does happen that a taxpayer wins that type of case.
 
Filing those returns will go a long way to reducing the tax owed assuming the correct tax is less than what IRS assumed. Yes you are allowed to file, legally you are required to.
Hi Dave, thank you for your comment. I understand I am required to file, and I fully intend to meet my obligations in spite of my failure to meet previous deadlines. This is a specific legal question, and you have just stated "you are allowed to file". I need some iron clad assurance of that - I was just looking through unopened previous notices, one states if I do not file by X date I will have to file a petition in tax court and owe the full amount while the process moves through the proceedings. Is this correct?

I mean any way I look it I have to file these back returns immediately no matter what - but will the IRS have closed the door on me filing an accurate return without forcing their hand through the court
 

Taxing Matters

Overtaxed Member
I will not owe them if I am allowed to file - this is my most urgent concern
If the CP 504 came with a collection due process hearing (CDP) notice then respond to the notice asking for a CDP hearing and state in your request that you are challenging the amount due and that you will provide returns to show that the tax the IRS says to be due is incorrect. Also state in your response that you contest that collecting by levy is in the best interest of the government and the taxpayer and that some other resolution is better. You need to do that within the 30 days stated in the notice or you lose your right to the CDP hearing and the right to go to Tax Court.

What that will do is buy you the time needed to get those returns done before the IRS starts issuing levies. Don't procrastinate any further. Promptly go out and get the returns done. I suggest submitting the returns as a supporting documents for an amended return (Form 1040X) for the periods the IRS has already done for you. It'll make the processing of them go a bit smoother. Ultimately you want to get those returns accepted and the tax you owe reduced or eliminated before the IRS proceeds to the next step in the collection process. If you do it quick enough you might find that the returns get processed even before the appeals officer contacts you. But keep a copy of the returns you submit and provide them to the appeals officer when contacted if the accounts are not yet adjusted to show the officer what is in the works. Hopefully the appeals officer will be willing to wait a few weeks for the returns to process so that you won't even need to attend a meeting with the officer.
 
If the CP 504 came with a collection due process hearing (CDP) notice then respond to the notice asking for a CDP hearing and state in your request that you are challenging the amount due and that you will provide returns to show that the tax the IRS says to be due is incorrect. Also state in your response that you contest that collecting by levy is in the best interest of the government and the taxpayer and that some other resolution is better. You need to do that within the 30 days stated in the notice or you lose your right to the CDP hearing and the right to go to Tax Court.

What that will do is buy you the time needed to get those returns done before the IRS starts issuing levies. Don't procrastinate any further. Promptly go out and get the returns done. I suggest submitting the returns as a supporting documents for an amended return (Form 1040X) for the periods the IRS has already done for you. It'll make the processing of them go a bit smoother. Ultimately you want to get those returns accepted and the tax you owe reduced or eliminated before the IRS proceeds to the next step in the collection process. If you do it quick enough you might find that the returns get processed even before the appeals officer contacts you. But keep a copy of the returns you submit and provide them to the appeals officer when contacted if the accounts are not yet adjusted to show the officer what is in the works. Hopefully the appeals officer will be willing to wait a few weeks for the returns to process so that you won't even need to attend a meeting with the officer.
Thank you for your detailed response, I truly appreciate it. I believe this CP504 came alone, but I will verify tonight and search through my previous mail for a CDP notice
 

davew9128

Junior Member
This is a specific legal question, and you have just stated "you are allowed to file". I need some iron clad assurance of that - I was just looking through unopened previous notices, one states if I do not file by X date I will have to file a petition in tax court and owe the full amount while the process moves through the proceedings. Is this correct?
The specific legal answer is that there is nothing in the law that prevents you from filing those returns.
 

LdiJ

Senior Member
(New York State)

Like a total idiot I have been procrastinating the filing of my taxes for various inexcusable reasons. The last year I filed was 2011. Due to a 1099-K filed in my name for 2014, the IRS has assessed me a huge tax bill because they do not have the offsetting expenses. They finally caught up to me and through notice CP504 demand that I pay the amount due or they intend to levy or seize my property, and I have 30 days to respond.

I know that this is not actually the final, formal action to levy, but I am unclear as to my options. They do give me the option to negotiate a payment plan, which doesn't help me much because I don't actually owe this huge amount of money.

My most pressing question - is it too late to file? Can I mail in my returns right now for 2012, 2013, and 2014, will they accept it, and if so what is the correct procedure?

I really hope the course of action is not to go to court, please help! Thank you in advance
They don't give you any warning of actually initiating a levy. The Intent to Levy notice is your last warning.

You are at the point where you need to file ALL of the outstanding tax returns 2012 through 2018 and negotiate a payment plan to cover all of the years that you end up owing, before they are going to release the levy. You really do not want them to actually levy, because they pretty much leave you with little at all to live on.
 

Taxing Matters

Overtaxed Member
They don't give you any warning of actually initiating a levy. The Intent to Levy notice is your last warning.
Well, they do in fact sometimes give additional warnings of the levy. A lot depends on exactly what asset or income the IRS intends to levy and whether the levy is done by the Automated Collection System (ACS) or by a revenue officer (RO). But it is true that the CP 504 (or similar letter sent by ACS or a RO, like letter 1058) and the CDP hearing notice is all that the tax code requires be sent prior to the IRS issuing levies. The IRS does not have to tell the taxpayer of which specific levies it intends to issue prior to serving them.

You are at the point where you need to file ALL of the outstanding tax returns 2012 through 2018 and negotiate a payment plan to cover all of the years that you end up owing, before they are going to release the levy.

Not true in all cases. It is possible to get a levy released prior to filing all unfiled returns or entering into a payment agreement. It all depends on the taxpayer's particular situation, what kind of taxes are involved, and what it's going to take to get the issue resolved. If the levy is causing a hardship and the IRS needs a bunch of information before entering into an installment agreement, for example, the IRS may release the levy and set a deadline to provide the information the IRS needs to determine what kind of payment arrangement it will accept. This is particularly common for wage levies.
 

LdiJ

Senior Member
Well, they do in fact sometimes give additional warnings of the levy. A lot depends on exactly what asset or income the IRS intends to levy and whether the levy is done by the Automated Collection System (ACS) or by a revenue officer (RO). But it is true that the CP 504 (or similar letter sent by ACS or a RO, like letter 1058) and the CDP hearing notice is all that the tax code requires be sent prior to the IRS issuing levies. The IRS does not have to tell the taxpayer of which specific levies it intends to issue prior to serving them.


I can imagine that there may be circumstances where a taxpayer would end up being aware of a particular item being levied a bit before the levy happens. However, I have not experienced that.

Not true in all cases. It is possible to get a levy released prior to filing all unfiled returns or entering into a payment agreement. It all depends on the taxpayer's particular situation, what kind of taxes are involved, and what it's going to take to get the issue resolved. If the levy is causing a hardship and the IRS needs a bunch of information before entering into an installment agreement, for example, the IRS may release the levy and set a deadline to provide the information the IRS needs to determine what kind of payment arrangement it will accept. This is particularly common for wage levies.
I have never seen the IRS release a levy when there are still outstanding tax returns that need to be filed. I have seen the IRS put a "pause" on collection actions prior to a wage levy actually going into place to allow someone a short time to get tax returns filed, but once a wage levy has been issued I have never seen them stop it without all tax returns being filed and an installment agreement in place.

I have walked a lot of taxpayers through some pretty hairy situations where time was of the essence everything had to be done on a full out basis. There have been many times where I have faxed tax returns and other documentation to the IRS so that the IRS could fax other documentation to the taxpayer's employer to stop the levy.
 

Taxing Matters

Overtaxed Member
I can imagine that there may be circumstances where a taxpayer would end up being aware of a particular item being levied a bit before the levy happens. However, I have not experienced that.
It happens with assets that are secured by a notice of federal tax lien and not easily moved. When I was a revenue officer I would warn some taxpayers that if they failed to get with the program by a certain date that I would seize (levy upon) their real estate. Then when the missed the deadline, I'd do just that. They weren't surprised because I'd told them what was coming.

I have never seen the IRS release a levy when there are still outstanding tax returns that need to be filed. I have seen the IRS put a "pause" on collection actions prior to a wage levy actually going into place to allow someone a short time to get tax returns filed, but once a wage levy has been issued I have never seen them stop it without all tax returns being filed and an installment agreement in place.
I have seen that. I did it as a revenue officer and I've gotten that for clients. The type of levy involved and the taxpayer's circumstances matter a lot. Suppose that Alan's sole income is from his job, he makes not much more than he needs for basic living expenses, and he has very little in savings to rely upon if he doesn't get the pay from his job. He gets hit with a wage levy. He still has 3 years of returns to file, but he needs a few weeks to get them done and submitted. The IRS would release some or all the wage levy in that circumstance so long as the taxpayer agrees to file the returns by the deadline given and provides a full financial statement so that a collection determination can be made. The smart IRS revenue officer/ACS employee will do that because the levy would create an undue hardship on the taxpayer if he can't pay rent and buy food because of the levy and the IRS is not disadvantaged much by it since the wage levy can always be reimposed if the taxpayer fails to come through. Moreover, if the collection employee refused to release the levy in that circumstance the taxpayer could seek the help of the IRS problem resolution officer (PRO) to get a taxpayer assistance order (TAO) ordering the IRS to release the levy while the taxpayer gets the returns together. That TAO overrides the collection office determination, and having a TAO issued is NOT a good thing for a collection employee. When your client is in a true hardship situation, sometimes just telling the collection official that if he/she won't release the wage levy (at least in part) that you'll submit a request to the PRO for a TAO is all that you need to do to get the collection employee to do the release.

If instead Alan had a levy on his bank account, then it's a bit harder because if the levy is released that money may disappear and levying a few weeks later may get nothing. But still there are ways to deal with that, too. You can get a partial release to allow the taxpayer to pay a critical bill, like rent. You can ask the IRS to tell the bank to sit on the levy instead of sending the money after usual 21 day period expires to see if the taxpayer comes through before releasing some or all of the money in the account. Again, the circumstances and type of asset or income being levied makes a difference.

It's a matter of knowing how the IRS collection function operates and what buttons to push in certain situations to get the result you need.
 
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