How IRS Collections Works: What You Need to Know?
My firm focuses on helping taxpayers in Portland, Maine with IRS tax problems. One of the keys to resolving their tax issues is understanding the process. From filing a tax return to the final notice of intent to levy, there is a logical sequence of how the IRS collects taxes. This post provides the basic framework.
The Framework
The process starts when the IRS receives your tax return. Upon receipt, the IRS records a tax assessment against the taxpayer's "account" for the taxes shown on the tax return. If the taxpayer has not paid his or her taxes in full the IRS issues a series of billing notices and demand for payment.
If the taxpayer does not pay the taxes due upon receiving the IRS' notice and demand then a statutory lien arises. This statutory lien now restricts the ability of the taxpayer to sell or dispose any assets he or she owns.
If the total taxes due are $10,000 or more the IRS will file a notice of federal tax lien with the registry of deeds in the taxpayer's county of residence. This is a more formal lien which is a public record and it will have an impact on the taxpayer's credit.
If the taxpayer continues to not pay the taxes due then the IRS taxes more aggressive collection actions. The IRS will issue a Final Notice of Intent to Levy which tells the taxpayer that if the taxes due are not paid then the IRS intends to levy the taxpayer's assets. Normally this means a seizure of money in a bank account or garnishment of the taxpayer's wages.
During the 30-day period, the taxpayer has a right to request a collection due process hearing. Called a CDP hearing, this is an opportunity for the taxpayer to offer a collection alternative to an IRS levy. The taxpayer has 30 days to request the hearing. If the taxpayer fails to file the request on time, the taxpayer loses the opportunity to contest the IRS actions in court.
Finally, if the Final Notice of Intent to Levy letter is ignored then the IRS can levy upon the taxpayer's assets. Often it is at this point that the IRS gets the taxpayer's attention. Nothing can be more disruptive than when the IRS seizes the taxpayer's funds. This is how the IRS forces the taxpayer to contact the IRS to arrange some payment arrangement.
As you can see, the IRS collections process follows a predictable sequence. Throughout the process there are opportunities for the taxpayer to resolve his or her tax debts. In a later post I will explain how a taxpayer goes about resolving their tax debts.
If you or someone you know in the Portland, Maine area has received an IRS collection notice or a Final Notice of Intent to Levy, please feel free to contact me directly at 207-299-0515 or by filling out my contact form.
James D. Wade, Esq.
Law Office of James D. Wade
53 Exchange St., Ste 400
Portland, ME 04101
207-747-5318
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