IRS Collection Process

There are a number of ways the IRS will attempt to collect an outstanding debt from a taxpayer. In this post we will go over the ways the IRS will attempt to contact the taxpayer and ultimately collect some form of payment. The first notice the taxpayer will receive in the mail is CP-14, this notice will indicate the amount of money the taxpayer owes and require some form of payment to be paid. The bill will indicate the amount of interest and penalties that have accrued up to that point. If you fail to pay the bill, many more notices will be sent in the near future.

How The IRS Collection Process Works

If you fail to pay your tax bill after several attempts by the IRS to notify you of your outstanding debt, the IRS will begin to aggressively pursue you to collect on your back tax. The next notice you will receive will inform you of additionally collection methods that will be used to collect the outstanding debt. There are three different methods the IRS can use to collect on a debt, these methods include liens, levies and refund offsets.

Defining a Lien

A lien is a method the IRS will use by seizing your assets, selling them and then using the proceeds of the sale to pay your outstanding tax liability. A lien is usually only used as a last resort after all other options to collect a debt have been used. Remember that a lien covers all the assets of value that the taxpayer owns.

Defining a Levy

A levy is a method the IRS will usually use against your bank account. The levy will seize the assets that are inside your bank account and use them to pay the tax liability outstanding. A levy can also be put against your wages in which case the money made from your job would go to the IRS to pay for your tax debt.

A Refund Offset

A refund offset is a method where the IRS will use any tax refund that is due to you against any tax liability owed to the IRS. If the amount of tax liability is larger than the total tax refund due to you then you will not receive any amount of tax refund.

The best way to avoid these collection techniques is to never ignore a notice from the IRS indication an outstanding tax liability. You should always try to setup some kind of payment plan or if possible pay your tax debt in full. The IRS is open to negotiations; you just need to be upfront and honest with them.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.


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