So with 1/4″ plywood, you have to be careful the kind that you use. I recommend the sureply brand of 1/4″ plywood because it is designed for flooring and tile. https://www.lowes.com/pd/SurePly-1-4-in-Whitewood-Plywood-Application-as-4-x-8/50124674
A regular sheet of 1/4″ plywood can be problematic. I have seen issues where after tiling over the regular 1/4″ plywood, areas can lift and create cracked tile. The shrinkage of the thinset can peal or pull the plywood from the original subfloor.
The other option is to go to a 3/8″ cdx plywood. This has enough structure to avoid this issue https://www.lowes.com/pd/Plytanium-3-8-CAT-PS1-09-Pine-Plywood-Sheathing-Application-as-4-x-8/1000068943
And if you can fix and get that plywood down to the same level…going over top will be no problem
