IRS Collection Process

If a person does not pay in full when filing taxes, the IRS will send a bill to that person, which is the first step in the collection process. Receiving the bill from the IRS is the very first step of the collection process. The process does not end until the bill is paid in full through tax debt help or by the taxpayers own work. People that have a bill with the IRS can decide to pay that bill with varying alternative payment options. When you receive a notice from the IRS you should pay the balance in full, which would eliminate the rest of the collection process. If you cannot pay the balance in full then you should pay as much of the balance that you possibly can. The remaining balance is subject to interest on top of the income tax collection, which is compounded daily, and is also subject to a monthly late payment. It would be in your best interest to pay the balance of the tax bill in full or as close to full to avoid high interest and late fees. The IRS will sometimes offer monthly installment payment plans to people that cannot pay the balance of the bill upfront. If you have exhausted all payment options available from the IRS you might be allowed to file for an offer in compromise. This is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax liability. The IRS is legally allowed to settle, or compromise, federal tax liabilities by accepting less than the amount due under certain circumstances without added federal tax penalties.

Be Prepared with Your Tax Documentation

Before contacting the IRS about paying your bill, make sure you have all of your basic income and expense information readily available. This information includes your rent or mortgage payments, transportation expenses, recent pay stubs and much more. Once you receive a bill from the IRS it is now your responsibility to contact the IRS and determine how and when you will be making payments. If you do not reach out to the IRS they will usually take one or more of the following actions to obtain a payment:

1. Filing a Notice of Federal Tax Lien
2. Serving a Notice of Levy
3. Offset of a refund

If the IRS decides to take action against you because you failed to reach out to them following the release of the bill they can choose to perform one of the three above options. If they file a Notice of Federal Tax Lien this means that the IRS has taken interest in your property as a creditor. The lien is considered a claim against your property as well as any property that is acquired after a lien is filed. A lien might appear on a person’s credit report and it might also hurt a person’s credit rating. The Certificate of Release of Federal Tax Lien cannot be issued by the IRS until everything that is owed to them is paid in full. A notice of levy is when the IRS can legally confiscate a person’s property and sell it to satisfy unpaid bills. Assets that can be levied are your boat, car, home, Social Security benefits, bank accounts and wages.

• If you are having problems with unpaid taxes, consult with a Tax Lawyer in your area to discuss the details and solutions of your case.