Receiving a notice from the IRS can be stressful, especially when the letter warns that the agency may take action to collect unpaid taxes. Two notices taxpayers may encounter during the IRS collection process are CP504 and LT11.
Although both notices involve unpaid tax debt and potential collection action, they serve different purposes and can represent different stages in the IRS collection process. Understanding the difference between a CP504 and LT11 can help taxpayers determine how urgently they need to act and what options may be available.
Ignoring either notice can allow IRS collection activity to progress. Taxpayers who cannot pay their balance in full should review the notice carefully and consider addressing the debt as soon as possible.
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What Is An IRS CP504 Notice?
An IRS CP504 is generally a notice informing a taxpayer that they have an unpaid tax balance and that the IRS intends to take collection action if the balance is not resolved.
The CP504 is commonly associated with a warning that the IRS may levy certain state tax refunds or other property if the taxpayer does not address the balance. The notice generally provides the amount the IRS believes is owed and explains how the taxpayer can make a payment.
A CP504 is an important warning, but it does not necessarily mean that the IRS has already seized your property. Instead, it indicates that the IRS is moving further into its collection process.
Taxpayers should review the notice to determine:
- Which tax year is involved
- How much the IRS says is owed
- Whether penalties and interest have been added
- When payment is due
- What collection action the IRS may take
- How to contact the IRS or make a payment
If you believe the balance is incorrect, do not simply ignore the notice. Review your tax records and determine whether the IRS account information matches your records.
What Is An IRS LT11 Notice?
An IRS LT11 notice is a more serious collection notice that generally warns a taxpayer that the IRS intends to levy property or rights to property if the tax debt is not resolved.
The LT11 is also associated with the taxpayer’s Collection Due Process (CDP) rights. This means the notice generally gives the taxpayer an opportunity to request a hearing with the IRS Independent Office of Appeals before certain levy action can occur.
An LT11 can therefore represent a significant point in the collection process. Taxpayers who receive one should pay close attention to the deadline included in the notice. The notice generally explains the taxpayer’s balance, the IRS’s proposed collection action, and the taxpayer’s rights and options. Because the consequences can be more serious, taxpayers should not wait until the deadline is approaching before determining how they will respond.
CP504 vs LT11: What’S The Difference?
The primary difference between CP504 and LT11 is the stage of the collection process and the rights associated with the notice.
A CP504 generally serves as a warning that the IRS intends to take certain collection action if the balance remains unpaid. It can be an indication that the IRS is escalating its collection efforts.
An LT11, on the other hand, is generally a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. It provides information about the IRS’s intent to levy and gives eligible taxpayers the opportunity to request a Collection Due Process hearing.
This distinction is important because the deadlines associated with an LT11 can affect a taxpayer’s ability to exercise certain appeal rights. Both notices should be taken seriously, but an LT11 generally requires particularly prompt attention because of the legal rights and deadlines associated with the notice.
What Comes After CP504?
What comes after CP504 can depend on the taxpayer’s account and whether they take action to resolve the balance.
If the taxpayer does not address the debt, the IRS may continue sending collection notices and may eventually issue a notice warning of its intent to levy property or rights to property.
The IRS may also take other collection actions when legally permitted. These can include levying certain bank accounts or wages or filing a federal tax lien.
The exact sequence of notices is not always identical for every taxpayer. The IRS may take different actions depending on the taxpayer’s account history, the type of debt, and other circumstances.
For this reason, receiving a CP504 should be viewed as an opportunity to address the tax debt before collection activity becomes more serious.
What Should You Do After Receiving A CP504?
Start by reviewing the notice carefully. Confirm the tax year and balance and compare the information with your records. If you agree with the amount but cannot pay the full balance, you may have options.
Depending on your financial circumstances and the amount you owe, you may qualify for an IRS payment plan that allows you to make monthly payments rather than paying the entire balance immediately.
Some taxpayers may also qualify for other collection alternatives. For example, taxpayers experiencing financial hardship may potentially qualify for Currently Not Collectible status.
In certain circumstances, an Offer in Compromise may allow an eligible taxpayer to settle their federal tax debt for less than the full amount owed.
The appropriate option depends on factors including your income, expenses, assets, tax liability, and ability to pay.
How To Respond To An LT11 Notice
An LT11 requires prompt attention because it generally provides the taxpayer with a deadline for requesting a Collection Due Process hearing.
If you disagree with the proposed collection action or want to pursue an available resolution option, carefully review the instructions included with the notice.
A taxpayer may have the opportunity to request a hearing using Form 12153, Request for a Collection Due Process or Equivalent Hearing.
During the process, a taxpayer may be able to discuss potential collection alternatives, such as an installment agreement or Offer in Compromise, depending on their circumstances. Because missing the deadline can affect certain appeal rights, taxpayers should consider getting professional assistance if they are unsure how to proceed.
Can The IRS Levy Your Property?
A levy is a legal seizure of property to satisfy a tax debt. Depending on the circumstances, the IRS may levy assets such as funds in a bank account or certain wages. However, the IRS generally must follow specific procedures before taking levy action.
Taxpayers who receive notices warning about a potential levy should not assume that the IRS will automatically seize everything they own. There are rules governing what the IRS can levy and how the collection process works.
The best way to avoid an escalating collection situation is often to address the underlying tax debt before the IRS takes additional action.
What Companies That Help With IRS Notice CP504?
Taxpayers dealing with a CP504 or LT11 may choose to seek help from a tax attorney, enrolled agent, CPA, or tax resolution company.
A tax professional may be able to review the taxpayer’s IRS account, explain the notice, communicate with the IRS, and help determine which resolution options may be available.
When evaluating professional assistance, taxpayers should understand exactly what services are included, how much they cost, and whether the professional has experience handling IRS collection matters.
Taxpayers should also be cautious of companies that promise to eliminate tax debt without reviewing their financial circumstances. No legitimate professional can guarantee that the IRS will accept a particular resolution.
How To Resolve IRS Tax Notices
The appropriate way to address an IRS notice depends on the type of notice and the taxpayer’s circumstances. First, verify the balance. If you believe the IRS made an error, gather documentation supporting your position and follow the instructions for disputing the balance.
If you agree with the debt but can afford to pay it, paying the balance in full can generally prevent additional collection activity related to that debt.
If you cannot pay the full amount, explore available payment arrangements or other collection alternatives.
It is also important to remain compliant with your tax filing obligations. Taxpayers generally need to stay current with required tax returns and payments to qualify for certain IRS resolution programs.
Frequently Asked Questions
What comes after CP504?
After a CP504, the IRS may continue its collection process if the taxpayer does not resolve the balance. Depending on the circumstances, the IRS may send additional collection notices, including a notice of intent to levy, or take other collection actions.
What is an IRS LT11 notice?
An LT11 is generally a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. It warns that the IRS intends to levy certain property or rights to property and explains the taxpayer’s opportunity to request a Collection Due Process hearing.
What companies that help with IRS notice CP504?
Tax attorneys, enrolled agents, CPAs, and tax resolution companies may assist taxpayers with IRS collection notices such as CP504. The appropriate professional depends on the complexity of the taxpayer’s situation and the type of assistance needed.
How to resolve IRS tax notices?
Review the notice, verify the balance, and follow the IRS’s instructions for responding. If you cannot pay the full balance, you may be able to pursue an installment agreement or another collection alternative. Taxpayers who disagree with the IRS should gather supporting documentation and address the issue promptly.
Conclusion
Receiving a CP504 or LT11 can be an important warning that the IRS is escalating collection activity. Taking action early may provide more opportunities to address the underlying tax debt before additional collection measures occur.
Optima Tax Relief helps taxpayers navigate complex IRS tax debt and collection issues. Depending on a taxpayer’s circumstances, potential resolution options may include installment agreements, penalty abatement, Currently Not Collectible status, or an Offer in Compromise.
If you have received an IRS collection notice and are unsure what it means or what to do next, understanding your options can help you take the appropriate steps toward resolving your tax debt.
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