Can the penalty on a CP504 still be removed?

Yes. The failure-to-pay penalty is still separately abatable under First-Time Abate or reasonable cause. But with a CP504 the priority is addressing the balance or setting up a payment plan so collection doesn't escalate.

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IRS Notice CP504: intent to levy your state refund

Q: What is an IRS CP504 notice?

A CP504 is a Notice of Intent to Levy. The IRS is telling you it intends to seize your state tax refund, and warning that it can move toward levying other income and assets if the balance stays unpaid. It's a serious, time-sensitive collection notice, not just a reminder.

Intent to levy Individual Time-sensitive

What it means

A CP504 is a Notice of Intent to Levy. The IRS is telling you it intends to seize, or levy, your state tax refund, and warning that it can move toward levying other income and assets if the balance stays unpaid. This is a serious, time-sensitive collection notice, not just another reminder. If you've been ignoring earlier letters, this is the one to stop and deal with.

Your deadline

Act by the date printed on the notice. Pay, set up a payment plan, or contact the IRS now. Doing any of those slows the escalation.

About your appeal rights: a later, separate notice, usually an LT11 or Letter 1058, carries formal Collection Due Process appeal rights before the IRS can levy your wages and bank accounts. The CP504 is a serious step, but that final levy notice is the one that triggers those hearing rights.

Can the penalty still be removed?

Yes, but that isn't the first thing to handle here. The failure-to-pay penalty is still separately abatable:

First-Time Abate (free): if you filed your returns and haven't had penalties in the prior three years, the IRS removes it, increasingly on its own under the new automatic relief program.

Reasonable cause: a serious event outside your control that overlapped the deadline (illness, a death, a disaster) can justify removal, in writing, with documents.

With a CP504, the priority is addressing the balance or getting on a payment plan so collection doesn't escalate. The penalty request can follow once the levy risk is under control.

What to do now

Treat this as time-sensitive. Don't let the date on the notice pass without acting.
Pay the balance if you can, or set up a payment plan to stop the escalation.
If you can't reach a resolution, contact the IRS at the number on the notice right away.
Once the balance is handled, ask to have the penalty removed. That's still separate from the tax.

See if your penalty is removable →

Common questions

Can the IRS take my paycheck right after a CP504?

Not from this notice alone. A CP504 authorizes levying your state tax refund. Before the IRS can levy wages and bank accounts, it generally has to send a later notice (an LT11 or Letter 1058) that carries Collection Due Process appeal rights.

Is a payment plan enough to stop it?

Setting up a payment plan is one of the main ways to stop the collection process from escalating. Pay in full or contact the IRS if a plan doesn't fit.

Should I deal with the penalty or the balance first?

The balance. The penalty is still removable later, but a CP504 is about stopping a levy, so handle the tax or a payment plan first.

This guide is general information, not tax or legal advice. PenaltyLetter is a document-preparation and mailing service and does not represent you before the IRS.