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Posted On September 20, 2019
How the IRS Collections Process Works in Henderson

How the IRS Collections Process Works in Henderson

Taxpayers who owe back taxes should learn about how the IRS collection process works to better understand their options when they need tax relief help. When the IRS is collecting back taxes, fines, and penalties from delinquent taxpayers, measures could range from holding back future tax refunds to seizing everything a taxpayer owns.

The Process Begins with a Notice

The collection process begins with a tax bill sent by the IRS to the delinquent taxpayer. This first notice will explain how much money is owed to the IRS and will request that the debt be paid in full. It will also show any penalties and interest added to the tax bill. In some cases, taxpayers can make payment arrangements with the IRS or settle the debt with an offer in compromise.

If the taxpayer is unable to pay the balance owed and arrangements are not made to settle the debt, the IRS’ automated system will send additional notices until a final demand for payment is sent. The IRS may also attempt to contact the taxpayer by phone. If the taxpayer does not pay the full amount due on the final demand or make payment arrangements, collection efforts will ramp up.

What Happens Once the Payment Deadline Passes?

Once the payment deadline passes, the debt goes into collection status and a statutory tax lien automatically goes into effect. This is a legal claim against the taxpayer’s bank accounts, home, business, and retirement accounts. A tax lien does not give the IRS the right to seize the property but instead stake a legal claim on any money received if the taxpayer sells any assets.

If the tax debt continues to go unpaid, the IRS will make the tax lien official by filing a notice of federal tax lien. Taxpayers have 21 days from the date of notice to dispute the lien or settle their debt. 

What if the Tax Debt Still Is Not Paid?

If the tax debt is not paid, the IRS may file a notice of levy which allows them to seize the taxpayer’s assets and sell them to settle the tax debt. The IRS may file a bank levy to seize homes and vehicles, money in bank accounts, investments, and retirement accounts. It may also place a levy to garnish current and future wages. In more serious tax defaults, the IRS may opt to start a criminal investigation.