What can the IRS do to collect a tax debt?

If you owe money to the IRS because of unpaid income taxes, the agency will send you a bill. This bill will detail the balance you owe plus any associated penalties or interest. The bill will demand a full payment of the entire balance, and you may be concerned about what actions the government will take to collect the money from you if you cannot pay it all at once. In order to collect a tax debt from you, the IRS can take the following actions.

1. Federal tax lien: If you do not remit the full amount you owe within 10 days of receiving the bill, the IRS can file a federal tax lien against you. This Notice of Federal Tax Lien allows the federal government to make legal claims against your property in order to satisfy your tax debt, which can include property you acquire after the government files the lien. The IRS can also file this notice publicly to inform your creditors that the agency has placed a lien on your property. What’s more, the lien could appear on your credit report, thereby negatively affecting your credit score.

Withdrawing the tax lien

Typically, the federal tax lien will remain on your record until you fully satisfy the debt or until the statute of limitations for collecting the debt expires. However, the IRS may withdraw the tax lien under the following circumstances:

• You filed for bankruptcy and the automatic stay was in place prior to the IRS filing for the tax lien.
• The IRS filed the notice too soon or did not follow the proper procedures when filing.
• You establish an installment plan to repay your taxes over time.
• The IRS determines that a withdrawal is both in your best interest and the government’s best interest or that a withdrawal will allow you to pay what you owe more quickly.

2. Notice of Levy: Along with filing a Notice of Federal Tax Lien, the IRS can also serve a notice of levy. This means that the IRS can seize your assets and property in order to satisfy your tax debt. The government can garnish your wages and your bank accounts as well as any Social Security or retirement benefits. By imposing a levy, the government will also be able to seize and sell your property, including your home and vehicle.
3. Offset a tax refund: Finally, the IRS may seize all or part of any federal or state income tax returns due to you and apply (offset) the amount to your federal tax debt.

Owing money to the federal government for unpaid taxes is a serious issue. However, you do have options available if you know that you cannot make the full payment right away to satisfy your tax debt. The IRS provides installment plans for repayment as well as other compromises that may help you in the long run. In order to determine which options will work best for you and your situation, you should consult an experienced tax attorney. An attorney will be able to assess your particular case and offer guidance and representation as you work with the IRS to satisfy your tax obligations.

Taylor L. Randolph

Taylor L. Randolph, the founder of Randolph Law Firm, P.C., located in Las Vegas, Nevada. He focuses his practice on bankruptcy, foreclosure prevention, and IRS tax problems. An award-winning attorney who is admitted to practice before the IRS nationwide, Taylor excels in the representation of individuals and businesses who are facing legal challenges.

Years of Experience: Nearly 20 years
Nevada Registration Status: Active

Bar & Court Admissions: Nevada State Bar Association U.S. District Court District of Nevada, 2006 U.S. Supreme Court, 2006 U.S. Tax Court, 2006