IRS Tax Collection Process Explained

Understanding the tax collection process with the IRS is important if you have a tax bill that is delinquent. Here are the basics of the IRS tax collection process and what you should expect. 

First Notice

The first thing that is going to happen is that you will receive a notice from the IRS. The first notice is going to be a letter that explains that you owe the debt and that you are expected to pay the entire amount. This is the first step in the collection process that generally only ends if you pay the debt. This notice is going to include any late fees and interest that have been charged on the balance that you owe. 

Payment Methods

You can pay the tax bill using several different methods. One of the most convenient ways to pay your tax bill is the EFTPS. This stands for the Electronic Federal Tax Payment System. This is an online system that allows you to pay securely with your credit card. You can also mail a check, money order, or cashiers check to the IRS. If you have a local IRS office that you can visit, you can also make a cash payment in person. Even if you can only afford to make a partial payment, you should do so.

Monthly Installment Agreement

If you cannot afford to make a lump sum payment, you might be eligible to set up a monthly installment agreement. With this process, the IRS will allow you to pay certain amount of money from every month over an extended period of time. If you want to set this up, you are going to have to pay $105 if you want to send payments. If you are willing to set up an automatic debit from your account, the installment agreement is only going to cost $52 to set up. 

Federal Tax Lien

If you are unwilling to pay your bill, the IRS can take further action. One thing that they can do is to use federal tax liens. The IRS can put a tax lien on any of your property. Typically, they will put a lien on your house and your car. With a lien, you will not be able to collect any money if you sell this property until you have repaid your debt to the IRS. This is automatically going to happen if you do not make your payment or set up an installment agreement within 10 days of receiving the first notice. This means that you have to act quickly if you do not want your property to have a lien against it.

Notice of Levy

The IRS can also use levying in order to collect the debt that is owed to them. This means that they can come and physically confiscate any of your assets and sell them if they want. Any of your personal property or real estate is fair game with this power that the IRS has.

Offsetting Refund

If you are owed any tax refunds, the IRS can offset them with this debt. They can also make it where you will not receive future refunds that you are owed.