Topic 201 - The Collection Process
 

If you do not pay in full when you file, you will receive a bill. This bill begins the collection process, which continues through alternative payment options and ends when your account is satisfied.

The first bill you receive will explain the reason for your balance due and require payment in full. It will include the tax due plus penalties and interest that are added to your unpaid balance from the date your taxes were due. You can pay this bill by sending the IRS a check or money order payable to United States Treasury with your notice. To pay by credit card, call 1–800–272–9829 or 1–888–729–1040.

If you cannot pay the balance in full, you should pay as much as you can with the notice. Refer to Topic 202, What To Do If You Can't Pay Your Tax, for alternatives available for paying the remaining balance. The unpaid balance is subject to interest which is compounded daily and a monthly late payment penalty. Therefore, it is in your best interest to pay your tax liability in full as soon as you can to minimize the amount of interest and penalty charged. You might also want to consider a cash advance on your credit card or a bank loan. The interest rate your credit card issuer or bank charges may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. It may also keep your tax debt from negatively affecting your credit rating.

If you are unable to pay your balance in full, we may be able to offer an individual payment plan based on monthly installments. Complete and mail an Installment Agreement Request, Form 9465 (PDF), with your bill. You can attach a voided check to your request to have your payment deducted from your bank account each month. Direct debit installment agreements provide you with the ability to make timely payments automatically, therefore reducing the possibility of defaulting the agreement. Some installment agreements can also be established over the telephone. Refer to Topic 202, What To Do If You Can't Pay Your Tax, for more information. If you are experiencing a significant financial hardship and are unable to currently pay anything, we may temporarily suspend collection on your account. Interest and late payment penalty will continue to accrue while you make installment payments or while collection is suspended. In addition, if you are a member of the Armed Forces, you may be able to defer payment of income tax that becomes due before or during your military service if your ability to pay is materially affected by your military service. For more information, see Publication 3, Armed Forces' Tax Guide, which may be obtained by accessing our web site.

Once all payment options have been considered and it is determined that you do not qualify for an installment agreement, you may opt to file an offer in compromise. An offer in compromise (OIC) is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability. The IRS has the authority to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances. The IRS resolves less than 1% of its balance due accounts through the offer program. For additional information on the program and how you may qualify for consideration, refer to Topic 204, Offer in Compromise.

When you contact the IRS, you should be prepared to discuss your basic income and expense information. To prepare, gather together all of your information about your income, assets and necessary living expenses, such as your most recent pay stubs, rent or mortgage payment amounts, transportation expenses, etc. This will allow us to assist you most effectively.

It is important to contact IRS and make arrangements to pay the tax due voluntarily. If you do not take some action to pay your tax bill or contact us to make arrangements to settle the account, we may take enforced collection actions to secure payment.

Some of the actions we may take to collect taxes include:

1. Filing a Notice of Federal Tax Lien,
2. Serving a Notice of Levy; or
3. Offset of a refund.

 

We will describe each of these actions in further detail.

By filing a Notice of Federal Tax Lien, the government establishes its interest in your property as a creditor. The lien is a claim against your property, including property that you acquire after a lien is filed. The lien is required by law to establish priority as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate. Once a lien is filed, it may appear on your credit report and it may harm your credit rating. Therefore, it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary. Once a lien is filed, the IRS generally cannot issue a "Certificate of Release of Federal Tax Lien" until the taxes, penalties, interest, and recording fees are paid in full.

A Notice of Levy is another method the IRS may use to collect taxes that are not paid voluntarily. This means we can, by legal authority, take and sell property to satisfy a tax debt. This could include your wages, bank accounts, Social Security benefits, and retirement income. If your tax liability remains unpaid, the IRS may also levy assets such as your car, boat, or real estate.

In addition, when you have an outstanding tax liability, any future federal tax refunds that you are due will be offset by the amount you owe. Any state income tax refunds you are due may also be levied, and the proceeds applied to your liability.

If you believe the bill is inaccurate, write the IRS office that sent you the bill, or visit your nearest IRS office. To help us correct a problem, please include a copy of the bill and copies of any records, such as the front and back of canceled checks or money orders, or other information that will help us understand what you believe is wrong. Please do not send your original documents. You may also call the IRS at 1–800–829–1040 to discuss why you disagree with the bill. Please have the bill and your records at hand when you call.

You have rights and protections throughout the collection process. Please refer to Publication 1, which provides additional information on Your Rights as a Taxpayer. More information on the collection process is available in Publication 594 (PDF), What You Should Know About The IRS Collection Process. These may be obtained by accessing our web site at www.irs.gov.