CP504B Notice: Intent to Levy on State Tax Refund

The CP504B Notice is a warning from the IRS of its intent to levy a taxpayer’s state tax refund due to unpaid federal taxes. This notice is often sent after prior attempts to collect the debt have been unsuccessful, serving as one of the IRS’s last efforts to recover the outstanding balance before taking direct enforcement action.

Key aspects of the CP504B Notice include:

1. Explanation of State Tax Refund Levy
   The notice explains that the IRS plans to levy the taxpayer’s state tax refund to satisfy their federal tax debt. This action enables the IRS to intercept and apply the taxpayer’s state refund toward the federal tax balance, reducing or eliminating the unpaid amount.
2. Options to Avoid the Levy
   Taxpayers have several options to prevent the levy on their state tax refund, including:
   • Paying the debt in full: Settling the balance to prevent the levy.
   • Establishing an installment agreement: Setting up a payment plan to address the debt gradually.
   • Requesting currently not collectible (CNC) status: Demonstrating financial hardship to suspend collection efforts temporarily.
3. Consequences of Non-Response
   If the taxpayer does not respond, the IRS will proceed with the levy, intercepting their state tax refund to offset the federal debt. This levy may continue each year if both state and federal tax refunds are applicable, until the debt is fully satisfied.
4. Importance to Tax Debt Resolution
   The CP504B Notice is a crucial step in tax debt resolution, allowing taxpayers one last opportunity to resolve their debt before the IRS levies state refunds. Responding promptly enables taxpayers to protect their state refund and address federal debt through manageable payment options.

The CP504B Notice underscores the importance of timely action to avoid enforcement actions on state tax refunds and encourages taxpayers to pursue debt resolution before the IRS escalates its efforts.