CP504: Notice of Intent to Levy — State Tax Refund

CP504 is the Notice of Intent to Levy state tax refunds — the third pre-levy notice. LT11 (or Letter 1058) is the Final Notice of Intent to Levy, which triggers the taxpayer's right to a Collection Due Process hearing. The 30-day CDP deadline runs from LT11, not CP504. Both are urgent, but LT11 is the critical deadline notice.

Not immediately — the IRS must first issue LT11 (Final Notice of Intent to Levy) before levying bank accounts, wages, and most other assets. However, the IRS can intercept your state tax refund after CP504 without additional notice. After LT11, the IRS can levy virtually any asset.

File Form 12153 within 30 days of the date on LT11 (not CP504). The request must be in writing, must be sent to the address on LT11, and must specify the collection alternative you are proposing (installment agreement, OIC, CNC, or dispute of the liability). The CDP hearing suspends levy action while pending.

You can request an 'equivalent hearing' within one year of LT11. The equivalent hearing provides the same opportunity to propose collection alternatives, but does not suspend levy action and does not provide Tax Court review rights. You should still request it — it provides leverage in negotiations — but the protections are significantly weaker.

Generally no — once the IRS has applied the state refund to the balance, it is treated as a payment and is not refundable. However, if the underlying assessment was incorrect (e.g., based on an SFR that overstated the liability), you can file an amended return, correct the assessment, and request a refund of the overpayment.

Upon receipt of a CP504, the tax professional should first verify the underlying tax liability triggering the notice and confirm the client's total outstanding balance, including penalties and interest. Next, the practitioner should advise the client to respond within the 30-day window prescribed under §6331(d) to request a Collection Due Process hearing if applicable. Preparing a detailed written protest or a Form 12153 can help protect the client’s rights and potentially halt the levy. Additionally, it is critical to coordinate with the state tax authority if the levy involves a state refund pursuant to intergovernmental agreements.

A timely request for a Collection Due Process (CDP) hearing must be filed within 30 days of the CP504 notice date, as mandated by §6331(d). The practitioner should submit Form 12153, Request for a Collection Due Process or Equivalent Hearing, ensuring it includes a clear statement of disagreement and any supporting documentation. It is also advisable to review the client's entire account transcript for any misapplied payments or procedural errors. Failure to meet the 30-day deadline typically results in the IRS proceeding with the levy without further administrative appeal.

Maintaining comprehensive records is essential, including copies of all IRS notices, client correspondence, payment history, and any prior agreements such as installment agreements or offers in compromise. Documentation supporting the correct calculation of the underlying tax liability and any abatements or adjustments should also be preserved. For CP504 cases, records of state refund intercepts and any communications with the state tax agency are critical to establish the legitimacy and scope of the levy. Good documentation supports both defense against collection actions and substantiation in case of subsequent appeals.

While the IRS does not publish specific thresholds solely for issuing CP504 notices, levies generally occur when the total outstanding tax liability exceeds the IRS's administrative collection threshold, which is approximately $600 for individual taxpayers in 2026. However, the IRS exercises discretion in levying state refunds based on the balance due and compliance history. It is important to note that the CP504 notice must be issued at least 30 days prior to levy per §6331(d), irrespective of the dollar amount, ensuring taxpayers have due process before levy actions commence.

The CP504 specifically notifies taxpayers of the IRS's intent to levy a state tax refund, whereas a CP14 is a preliminary notice of balance due without immediate levy action. Unlike federal levy notices that may attach wages or bank accounts, the CP504 targets state refunds intercepted through intergovernmental agreements. Both CP504 and other levy notices require a timely response to avoid enforced collection, but CP504's unique focus on state refunds means practitioners must monitor both IRS and state tax systems. Additionally, CP504 includes a mandatory 30-day notice period as per §6331(d), emphasizing the statutory protection of taxpayer rights.

Yes, a taxpayer can have concurrent levies on various assets, including a CP504 levy on state tax refunds and federal levies on bank accounts or wages. Tax professionals must carefully coordinate responses to each levy notice, ensuring compliance deadlines are met and exploring unified resolution strategies such as installment agreements covering all liabilities. It is critical to analyze the priority and attachment rules under the IRC and Treasury regulations, as levies on certain assets may be subject to exemptions or require different procedural handling. Proactive communication with both the IRS and state tax agencies is essential to prevent conflicting collection actions.

Explain to the client that the CP504 is a formal IRS warning that their state tax refund may be seized to satisfy unpaid federal tax debts, emphasizing that this is a serious collection action under §6331(d). Inform them they have 30 days from the notice date to request a Collection Due Process hearing to dispute the levy or propose alternative resolution methods such as installment payments. Encourage prompt communication to avoid enforced levy, and clarify that ignoring the notice can result in loss of rights and automatic interception of state refunds. Stress the importance of providing complete financial information to evaluate possible relief options.