IRS Collections – All Your Questions Answered
The IRS is not a fun organization to deal with – especially if you owe them money. If IRS collection has begun, you will want to clear up any issues with your tax return (or a back tax return) – as soon as possible.
Usually, the IRS wants to work with you – as long as you communicate with them. If they’ve already sent you a notice of federal tax lien, you will want to know your rights as soon as possible.
You do not want any tax liability on your record, and if you speak to the IRS, usually you can agree to an installment agreement, or an offer in compromise. Otherwise, the IRS may start to seize assets, garnish your wages, and even raid your bank accounts.
What Do I Do About IRS Collections?
If you are worried that you will have the IRS start seizing your assets, you should immediately let them know that you are in a state called ‘currently not collectible’. This means you do not have the means to pay your owed taxes, but that you are communicating with the IRS about the issue.
You will likely be presented with payment options (usually a payment plan) once you are in better financial shape. This can be done automatically via direct debit or direct deposit, as the IRS will collect the amount due regularly, every month.
If you get into a bad financial state, the first thing you should do is talk to a qualified tax professional. They will either be able to communicate to the IRS for you (if you give them power of attorney), or they can advise you on how to communicate with the Internal Revenue Service yourself.
What Is An Offer In Compromise?
If you want to settle your back taxes, one common method is called an ‘offer in compromise’. Essentially this is a negotiated price with the IRS, which is lower than the total amount you actually owe.
This differs from an installment agreement, in that you aren’t paying the total amount, with a monthly amount coming out of your debit or bank accounts automatically. There’s no way around paying income tax, but there are ways to delay collection (though it’s not advisable).
The best case scenario is always to pay your taxes on the appropriate due date. A payment agreement is not the best option, but the IRS is used to dealing with collection issues from taxpayers.
Does The IRS Use Debt Collection?
Yes, the IRS has contracted with at least one private collection agency in the past, to collect tax debt. You may receive phone calls, and your public records could be used to contact you further.
When you have tax due, the IRS is not going to be your friend – but they will work with you if you are forthcoming. Delaying typically only makes IRS situations worse, not better.
If you are forthright with the IRS, they may request additional information, but it’s better than getting a collection information statement. Each tax year, the IRS is used to dealing with delinquent taxes, but there are also enrolled agents who are a liaison for you to speak with the IRS.
You could also look for a taxpayer advocate, as another alternative. Ideally you want to be getting a tax refund each year – not owing back taxes, and worrying about IRS collections.
Is Tax Debt A Serious Issue?
Yes, tax debt is a serious issue. Just like credit card debt, not only does tax debt go on all of your financial records – it comes with heavy penalties and fines.
If you get even a first notice from the IRS regarding possible collections – immediately contact a qualified tax professional.
What Are My Appeal Rights?
You are welcome to try and appeal any IRS collections, but a word of caution – it usually doesn’t go too well. 9 times out of 10, it’s far easier to work with the IRS, than it is to fight them.
To be thorough, you can file legal appeals with the government for IRS issues, but we do not advise it. It’s much easier to work with them via a qualified tax professional, and will also reflect much better on you, moving forward.
Other Factors To Consider For IRS Collections
Unlike in the past, the IRS now may use private debt collectors to call you. Prior to a few years ago, the IRS only ever communicated via mail.
This made it easy to spot IRS scams, as if it wasn’t sent in the mail, you’d immediately know it was not a legitmate communication from the IRS. Nowadays, you may receive phone calls about IRS collections, so these are not necessarily scam calls.
However, you should still be extraordinary cautious whenever communicating with the IRS. This is one of the (many) reasons we advocate for utilizing a CPA (or other qualified tax professional).
The Bottom Line On IRS Collections
There you have it – everything you wanted to know about IRS collections. If you have further questions about the IRS collections process, be sure to contact the IRS directly.
The easiest way to do this yourself is via IRS.gov. However, we still recommend going through a qualified tax professional – they will have years (or even decades) of experience dealing directly with the Internal Revenue Service.
As with most financial issues, you want to stay out in front of IRS tax issues. The longer you wait, the steeper the penalties, and the more you have to pay.
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