In this article, I discuss how taxpayers find themself in the Collections Division of the IRS.
People always ask us - How on earth did I get into the Collections Division of the IRS? In this article, I will present two ways you, as a taxpayer, can end up in the sights of the IRS and their collection employees, called Revenue Officers or Revenue Agents.
Two ways you can end up in the collections division of the Internal Revenue Service include:
Filing a tax return that has a balance due, and then not paying what you owe.
Failing to file a tax return. When you don’t file a tax return, very bad things happen because the IRS will often file what is called a Substitute For Return (SFR). Do you think when the IRS files a SFR they have your best interest in mind and are looking to be sure they maximize your deductions? Spoiler alert: They are not. If you would like to learn more about SFRs, please read our article. If a SFR is filed on your behalf, and there is an outstanding balance due from taxes, penalties, and interest and you don’t pay that balance, you can also wind up in the collections division.
The process of ending up in the IRS’s Collection Division is as follows:
The tax is assessed by the IRS.
The IRS will send you, the taxpayer, a bill informing you that you have a balance due and that you need to arrange for payment.
A statutory (silent) lien arises that attaches to all of your currently owned property and any property that you acquire after the lien exists.
A series of additional bills and notices will be sent to each seeking payment. Learn more about the series of notices.
A final notice is sent stating that the IRS intends to levy your income and assets. At this point, you have a 30-day window to request a Collection Due Process Hearing (CDP).
When you owe more than $10,000 and sometimes even when you owe less, the IRS will file a Notice of Federal Tax Lien in the public records.
Assuming an appeal has not been filed, the IRS can then start seizing your assets. This can also include garnishing your wages or siphoning money from your bank accounts.
If you are thinking the process sounds painful, you are right! The IRS has designed it to be - once your account is in the Collections Division of the IRS, their goal is to get what they are owed. Of course, there are a myriad of ways to resolve your tax issue including an installment agreement, a partial pay installment agreement, an offer in compromise, and seeking currently not collectible status. We feel that if you are in the collections division of the IRS or you fear that you will be that the sooner you start to take action, the easier it will be to resolve your tax problem. Plus, every day that you don’t take action can result in you just owing more as penalties and interest can continue to be added to your account and can quickly and exponentially cause your balance to skyrocket.
If you would like to explore how we can help you resolve your tax problem, contact us today to schedule a free, no-obligation, consultation. While we are based in Santa Fe, New Mexico with offices in Albuquerque, we are licensed by the IRS to practice in any state within the U.S - contact us today, regardless of where you live to get started with resolving your tax issues.
Stephen J. Hardy, Enrolled Agent, MBA
Founder, Resolution Tax Services