IRS Collection Process

Understand the IRS Collection Process

Delay may Result in Lost Rights

The IRS is the largest collection organization in the world. You are its target. Time is not on your side. You must get on top of tax problems early. You may lose important rights merely by the passage of time. The IRS will wait 30 - 45 days after which it takes enforcement actions that are more serious than mere notices. If you don’t pay or make arrangements to pay, the IRS has a toolkit of options. Don’t be fooled into thinking that the IRS cannot locate your job or assets. Nearly every transaction involving wages, investments, retirement accounts, buying or selling real property, or the ownership in a business or partnership, leaves a paper trail and electronic records. Modernly, income from a retirement account, interest earned, dividends and every payment to an employee, independent contractor or vendor must be summarized and electronically transmitted to the IRS at year-end. Many states have automated sharing of information with the IRS.

Accelerated Enforcement and Collection Activity

The IRS has some discretion in deciding whether to send you all notices. Factors that will be considered are whether or not you are a “repeater” having had previous collection actions, or have previous years of unfiled tax returns. If the IRS has reason to believe that you have assets that you intend to dispose of or that you will attempt to hide, the collection process can be accelerated dramatically.

Prior Collection History or Large Tax Bill

If the taxpayer has a history of delinquency or already owes unpaid taxes, he or she will likely receive only a few notices. If the tax bill is large, enforcement action may be moved up, and fewer notices will be sent.

Employment Taxes: Business Owners and Self-Employed

If there are unpaid employment taxes, the IRS becomes very aggressive, very quickly. You should expect a personal visit by a Revenue Officer. This is because payroll taxes include the withholding from employee’s checks. Employee withholdings are considered trust fund monies which you pay over to the IRS, but in which you have no rights. If only income taxes are involved, the IRS will likely still send fewer notices, omitting the second and third notices previously mentioned.

Last Chance Notices

If you do not respond by paying the taxes due, or setting up a payment program the IRS will prepare to take legal action. You will receive an IRS letter, often form letter LTR 11 or letter 1058, “FINAL NOTICE-NOTICE OF INTENT TO LEVY AND NOTICE OF YOUR RIGHT TO A HEARING-PLEASE RESPOND IMMEDIATELY”.You may also receive Letter 3172 “NOTICE OF FEDERAL TAX LIEN FILING AND YOU’RE RIGHT TO A HEARING UNDER IRC 6320”. These letters are telling you that the Service intends to levy your wages or bank accounts, and it will perhaps seize assets. Enforcement action can occur in as soon as 30 days. Examples of assets that may be seized include:
  • Wages, real estate commissions and other income
  • Bank accounts
  • Business assets
  • Personal assets (including your car and home)
  • Social Security benefits

IRS may Contact your Employer and Neighbors

It is at this point that the IRS will actively begin looking for assets. The IRS may contact your employer, contact your neighbors or credit sources and make inquiries about your employment, income and your assets.

No Notice Revenue Officer Interview

Your account may also be referred to a Revenue Officer in your local area. The Revenue Officer may make an in person visit and appear on your doorstep or place of business without notice or warning. This is particularly hazardous for you because you are surprised by the contact and will caught off guard. It is perfectly Ok to say that are willing to cooperate but you wish to have your attorney present. Request a future meeting date at the IRS office and say that your attorney will telephone to make the appointment. Obtain representation for any interview. An innocent remark may result in additional years coming under investigation. It is true that anything you say to the Revenue Officer will be noted and may be used against you in the Government's case.

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