Sweat-Out 504 Notices from IRS to get a Form 3520 CDP Hearing

Sweat-Out 504 Notices from IRS to get a Form 3520 CDP Hearing

IRS 503 & 504 Notices to Get a CDP Hearing

When it comes to international information reporting penalties, in the past few years the Internal Revenue Service has significantly increased enforcement of Form 3520 gift and reporting penalties. These types of penalties are extremely unfair, because oftentimes there is no unreported income and therefore no tax consequence to the missed filing –– along with the fact that they are assessable penalties, which means that the penalties are assessed without the taxpayer having an opportunity to fight the penalties before they are issued. In an all too common situation, the Taxpayer will receive a CP15 Notice, and while they are waiting for the outcome of their initial reasonable cause protest or submission — and while they are waiting for the opportunity to submit a Collection Due Process Hearing Request — they will receive one or multiple 503/504 these notices. Let’s explore the basics of the IRS 503/504 notice.

What is a 503 or 504 IRS Notice?

When a Taxpayer owes a debt to the Internal Revenue Service, the IRS will begin enforcing the collection of that debt — and after a certain amount of time passes and the debt has not been paid, the IRS steps it up a notch and the Taxpayer will receive a series of strict enforcement letters letting the taxpayer know that if the debt is not paid, the IRS may pursue more stringent enforcement procedures such as a Levy or Lien (NTFL). These scary notices typically come by way of a 503 and 504 Notice. And, the taxpayer will typically receive several of these notices before the IRS reaches the final endgame notice of a proposed letter and/or actual Notice of Federal Tax Lien being placed on the taxpayer—both of which then allow the Taxpayer to apply for a Collection Due Process Hearing (Form 12153),

*Sometimes along the way, the taxpayer will receive a notice that the IRS has snatched up a state tax refund — and this will, in turn, allow the taxpayer to pursue a collection due process hearing.

503 and 504 Notices Explained

As provided by the IRS

What this notice is about

You received this notice because we haven’t received payment of your unpaid balance. This notice is your Notice of Intent to Levy (Internal Revenue Code Section 6331 (d)). If you don’t pay the amount due immediately, the IRS can levy your income and bank accounts, as well as seize your property or your right to property including your state income tax refund to pay the amount you owe.

What you need to do

      • Read your notice carefully. It explains how much you owe and your payment options.

      • Pay the amount you owe immediately.

      • Make a payment plan if you can’t pay the full amount you owe.

      • Contact us if you disagree by calling the toll-free number shown on your notice.

You may want to

Frequently Asked Questions

What is the notice telling me?

      • This notice is your Notice of Intent to Levy as required by Internal Revenue Code Section 6331 (d). It is your final reminder telling you that we intend to levy your wages, bank accounts, or your state tax refund because you still have an unpaid balance on one of your tax accounts. It is also telling you that we will begin searching for other assets on which to issue a levy. To avoid this, you must pay the amount you owe immediately.

      • We can also file a Notice of Federal Tax Lien if we haven’t already done so. A lien is a public notice to your creditors that the IRS has a right to your interests in your current assets and any assets you acquire after we file the lien; it can affect your ability to get credit.

      • This notice also explains the denial or revocation of a United States Passport. The Fixing America’s Surface Transportation (FAST) Act legislation, which generally prohibits the State Department from issuing or renewing a passport to a taxpayer with seriously delinquent tax debt. Additional information on passport certification is available at IRS.gov/passports.

What do I have to do?

      • Pay the amount shown on your notice immediately. You can pay your balance online or mail us your payment in the envelope we sent you. Please include the bottom part of the notice to make sure we correctly credit your account.

      • If you can’t pay the full amount, pay what you can now and contact us immediately at the toll-free number shown on your notice to see if you qualify for a payment plan (including installment agreements) to pay the remaining balance on your account over time. You can also apply for a payment plan online by using the Online Payment Agreement Tool which is the fastest way to get an installment agreement approved.

What happens if I don’t pay or contact the IRS?

      • If you don’t pay the amount due immediately or make payment arrangements, we can file a Notice of Federal Tax Lien publicly establishing our priority with your creditors. If the tax lien is in place, you may find it difficult to sell or borrow against your property. The tax lien would affect your ability to get credit ? which may harm your credit rating.

      • In addition, we can seize (“levy”) any state tax refund to which you’re entitled. If you still have an outstanding balance after we seize (“levy”) your state tax refund, we 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. We can then seize (“levy”) or take possession of your other property or your rights to property. Property includes:

          • Wages, real estate commissions, and other income

          • Bank accounts

          • Business assets

          • Personal assets (including your car and home)

          • Social Security benefits

Who should I contact?

If you have any questions about the notice, call us at the toll-free number shown on your notice as soon as possible to speak to a customer service representative.

What if I don’t agree or have already taken corrective action?

If you don’t agree, contact us immediately to discuss your matter with a customer service representative. We’ll do our best to help you.

If you have already paid this liability or arranged to pay it with an Installment Agreement, you should still call us at the toll-free number shown on your notice to make sure your account reflects this.=

Putting the Collection on Hold 

Just because a taxpayer may be pursuing a protest or appeal to the CP 15 form 3520 penalty does not mean the Internal Revenue Service will stop enforcement. But, taxpayers or their representatives can typically reach out to the Internal Revenue Service and receive a state of enforcement from anywhere from 30 days to nine weeks – – and sometimes the state can be extended if the taxpayer receives additional notice.

Notice of Federal Tax Lien or Notice of Levy

After the Taxpayer has received several notices, they will typically receive a Notice of Proposed Levy or an actual Notice of Federal Tax Lien being placed on them –– and sometimes both (especially when very large penalties are involved). At this time, presuming the taxpayer has not received any other letters that may spark the ability to request a Collection Due Process Hearing, the Taxpayer would now be able to pursue a Form 12153 Collection Due Process Hearing. To make sure the Taxpayer receives the full benefits of a CDP, they should be sure to submit the form within 30 days of the date of the notice they receive – – otherwise the CDP becomes an equivalency hearing, which does not provide the same tax court opportunities as a CDP hearing.

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