IRS Collections Lifecycle

If you owe the IRS money, you have plenty of company. About 10 million people are delinquent in their tax payments, with about $120 billion in past-due balances.

Between the Internal Revenue Code and IRS procedures, there is a predictable progression to the collection process.

Once your tax has been assessed, the IRS will send you a letter indicating that you have a balance due. If the past-due balance is not resolved, you will receive a series of letters, each with a somewhat harsher tone. The last letter is a Notice of Intent to Levy. This letter is sent via certified mail. This is the last reminder before the IRS starts what is referred to as enforced collection.

The IRS has the most robust collection tools available in the United States, and if you ignore the Notice of Intent to Levy, they will begin to use them. These tools include:

  • Bank Levy. The IRS usually knows where you bank due to bank reporting requirements. The easiest way to get your attention (if you ignore their letters) is to seize the funds in your bank. If you fail to respond to the Notice of Intent to Levy, the IRS can seize your funds without further notice.
  • Wage Garnishment. The IRS is allowed to seize the majority of your wages. Along with bank levies, this is a common tool in use by the IRS.
  • Other Asset Seizures. While less common, the IRS has the power to take your belongings (with some exemptions).
  • Filing a Notice of Federal Tax Lien. A filed Notice of Federal Tax Lien will encumber your property with an IRS security interest.
  • Passport Revocation. In certain cases, the IRS will cause the State Department to restrict or revoke your passport.

Your best course of action is to address the liability before the IRS resorts to these draconian tactics.

A close up of several different tax forms.
A blurry image of dollar signs in the background.

What Options Do You Have?

There are several options you have once the IRS has started the collection process:

  • Do nothing. This will result in continued seizures and wage garnishments. This is the worst option, but a surprising number of people do nothing until the financial pain is too severe.
  • Payment Plan. This is also called an Installment Agreement by the IRS. This will allow you to pay over time.
  • Currently Not Collectible. If you can demonstrate to the IRS that you have no available income once your necessary living expenses are paid, they may suspend collection efforts for a period of time.
  • Offer in Compromise. In some cases, the IRS will accept an amount less than the amount you owe in full satisfaction of your liability.

Contact me if you would like to discuss alternatives that will work for your circumstances.

Contact Rob