How the IRS Collection Process Works
If you file your tax return without paying the amount due, or if you had any other assessment, such as from an audit or error on your return, you will receive a bill from the IRS. This marks the start of the collection process.
If you believe the bill to be incorrect you may write to the IRS office that sent the bill, or you may contact the IRS at 1-800-829-1040. A representative will discuss the bill with you and make any appropriate changes. If you have previously paid the amount due, you may be requested to send a copy of your cancelled check(s) or other information.
The first bill, merely explains the reason you have received it and demands payment of in full shown.The bill will indicate the tax year, the tax form, and the total amount due, including interest and penalties. Failure to respond within approximately one month will trigger one or two subsequent bills, with each progressively harsher than the last.
If the bill is correct, you have the following options:
Pay the amount in full.
If you are unable to pay in full, you can arrange for an installment agreement. Keep in mind that any unpaid balance will be subject to interest and penalties.
If your financial condition so warrants, you may be able to get the IRS to classify you as “currently not collectible” which will defer collection efforts for a certain period of time (usually six months to one year). After that time they will get an updated status of your situation. Again, interest and penalties will continue to accrue.
If (and it’s a big “if”) you qualify, you may be able to settle your entire tax obligation for less than the amount owed. This is called an “offer in compromise”.
If the taxes resulted from a former spouse’s action, and you feel that you should not be required to pay them, you may be able get relief as an “innocent spouse.
If you don’t respond to the first two (or possibly three) IRS notices, you will be warned of enforced collection, usually by a notice of “intent to levy and notice of your rights to a hearing” which, by law, allows you 30 days to resolve the matter before actual levy can occur.
Note: The IRS has the authority to file a federal tax lien at any time after a demand for payment has been sent to the taxpayer. This is true even if the taxpayer and the IRS have agreed upon a payment plan.
Should you engage a “qualified” tax professional when dealing with IRS collection efforts? The upside of doing so is that a tax professional who has worked heavily in the debt resolution area, myself included, is familiar with the tax collection process and the ways to deal with the IRS. You could spend a lot of time trying to find an answer to a question that an expert already knows. If you are a person who finds it too stressful dealing with the IRS, you may wish to have someone represent you.
The downside is, of course, it will cost you some money in fees. If the problem is small and you don’t mind dealing directly with the IRS, you can probably handle your own case. However, if your case is complex or technical, you are probably best off getting help.
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