The IRS is obviously a huge bureaucracy, and unsurprisingly, the proverbial wheels can turn slowly. In routine personal tax debt cases that do not involve unpaid payroll taxes or outright fraud, it is sometimes possible to go undetected for years without incurring any IRS tax trouble. And, even after receiving a collection letter or two, it’s a pretty safe bet that aggressive collection action is still somewhere in the future. But, upon receiving the third, and usually the last, letter from the IRS regarding an unresolved IRS tax problem, the agency’s patience has run out and they come to collect. The CP 504 is a game changer.

Specifically, the CP 504 is the final notice to the taxpayer that the IRS is seeking payment of a past due balance or resolution of the tax problem before collection action begins. This collection action will be detailed in the letter. Typically, the taxpayer is notified that a lien will be placed against their state tax refund and will be applied against the debt. The letter can also serve as notification that the IRS is about to search for assets on which a federal tax lien or lien may be placed. By the way, if the taxpayer had previously requested an offer in compromise as a means of resolving their tax problems with the IRS, the agency won’t have to search long for the assets to seize; The application for the OIC requires, of course, that a complete financial statement be submitted to the IRS.

But, as a practical matter, the CP 504 collection letter would never have been generated in the first place if the delinquent taxpayer had responded promptly to prior notices about the resolution of their tax problems from the IRS. Procrastination, while a character flaw most have fallen victim to, is a dangerous course of action at this point in the IRS process. They are serious and an aggressive collection action is coming. Unless one has the time, intelligence, and inclination to quickly become an expert in IRS policies and procedures, unrealistic for most of us, it is time to seek the advice of a tax professional, especially if there is any doubt about the validity of the debt. The financial and emotional impact of a bank or wage tax on most families cannot be underestimated. The long-term consequences of a federal tax lien can also be severe, affecting employment, credit acquisition, and even routine business transactions. There are still equitable and affordable options regarding the resolution of IRS tax problems, even after receiving a CP 504, but the debtor should be proactive in seeking those options. At this point, the advice of a tax resolution professional who is well-versed in IRS collection tactics can be invaluable and well worth the effort and expense.