The IRS Collection Process - Publications 594 and 1660

Publication 594 (PDF), The IRS Collection Process

Publication 1660 (PDF), Collection Appeal Rights

IRS Collection Actions include:

• Filing a Notice of Federal Tax Lien. The federal tax lien is a legal claim to your property, including property that you acquire after the lien arises. The federal tax lien arises automatically when you fail to pay the taxes you owe within ten days after they send their first notice of taxes owed and demand for payment. The government also may file a Notice of Federal Tax Lien in the public records. The Notice of Federal Tax Lien publicly notifies your creditors that the IRS has a claim against all your property, including property acquired after the Notice of Federal Tax Lien is filed. The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating. The IRS may withdraw a Notice of Federal Tax Lien if the IRS determines that 
  1. The Notice was filed too soon or not according to IRS procedures; 
  2. You enter into an installment agreement to satisfy the liability 
  3. Withdrawal will allow you to pay your taxes more quickly
  4. Withdrawal is in your best interest, as determined by the National Taxpayer Advocate, and the best interest of the government.
• Serving a Notice of Levy. The IRS also may use a levy to collect taxes such as wages, bank accounts, Social Security benefits, and retirement income. The IRS also may seize property for the purpose of selling the property to satisfy a tax debt. Such property may include your car, boat, or real estate.
• Offsetting a refund to which you are entitled. The IRS will apply future federal tax refunds that you are due, to offset the amount you owe. Any state income tax refunds you are owed also may be applied to your federal tax liability.

If you do not pay your taxes in full when your tax return is filed, you will receive a bill. This bill starts the collection process, which continues until your account is satisfied or until the IRS may no longer legally collect the tax; for example, when the collection period has expired.  The IRS can by statute and often does file a tax return for you if you fail to file one willfully.  It is called a Substitute For Return (SFR).  An SFR with an unsatisfied tax liability starts the collection process rolling. The first notice you receive will be a letter that explains the balance due and demands payment in full. It will include the amount of the tax plus any penalties and interest added to your unpaid balance from the date the tax was due.  If you cannot pay in full, refer to Topic 202, Tax Payment Options, for alternatives available for paying. The unpaid balance is subject to interest compounded daily and a monthly late payment penalty. If you are unable to pay anything because of financial hardship, the IRS may temporarily suspend certain collection action, such as issuing a levy, until your financial condition improves. The IRS may, however, file a Notice of Federal Tax Lien while your account is suspended. 

If you are unable to immediately pay your balance in full, the IRS may be able to offer you a monthly installment agreement. To request an installment agreement, use the Online Payment Agreement (OPA) or complete and mail with your bill an Installment Agreement Request,Form 9465 (PDF). Some installment agreements can be established over the telephone. If you do not qualify for an installment agreement under any of the payment options, you may propose an Offer in Compromise (OIC). An OIC is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability by payment of a reduced amount. Refer toTopic 204, Offers in Compromise, for additional information.

John R. Dundon, EA - 720-234-1177 - jddundon@comcast.net - http://prep.1040.com/jd/ - Enrolled with the United States Department of Treasury to Practice before the IRS - Enrolled Agent # 85353. Under contract with the IRS as a Certified Individual Taxpayer Identification Number (ITIN) Acceptance Agent - I am a Federally Authorized Tax Practitioner (USC 31 Section 330 + IRC 7525a.3.A) regulated under US Treasury Cir. 230.