The Internal Revenue Service (IRS) collection process is a structured procedure for recovering unpaid taxes. When a taxpayer fails to pay their tax debt, the IRS sends a notice of the outstanding amount, including any penalties and interest accrued. This initial communication is a prompt for the individual to settle their debt. It offers options for payment or to discuss payment plans if immediate payment is not feasible.
If the taxpayer doesn’t respond or make arrangements to pay, the IRS may take more stringent measures to collect the debt. These measures may include placing a lien on the taxpayer’s property, levying bank accounts or garnishing wages. A lien secures the government’s interest in the individual’s assets, while a levy actually seizes the assets to satisfy the debt.
Understanding IRS notices
The first step in the IRS collection process involves sending a bill to the taxpayer. This bill details the amount owed, including taxes, penalties and interest. Taxpayers must understand that these notices also provide information on how to dispute the amount if they believe it is incorrect. Ignoring these notices can lead to more severe actions by the IRS. It’s important for individuals to either pay the amount due promptly or contact the IRS to discuss alternative arrangements.
Consequences of non-payment
Failing to address tax debts can lead to significant financial and personal consequences. Beyond the immediate financial strain of liens and levies, non-payment can adversely affect an individual’s credit rating, making it difficult to obtain loans or credit in the future. Because of this, it’s in the best interest of taxpayers to respond promptly to IRS notices and take proactive steps to resolve outstanding tax debts. Engaging with the IRS at the earliest opportunity can help avoid escalating debt collection actions and allow for a more manageable resolution process.
Some taxpayers may have realized that the IRS notices stopped for a while because of changes in how the agency was funded and operated. Those notices are ramping up again in 2024, but some taxpayers will have limited relief from the penalties that amassed during the time those notices were stopped. Despite the limited relief, the original tax debts still remain.
Given the complexities of this issue and all that is at stake, taxpayers should strongly consider working with a legal representative to determine what options they have for addressing their past-due balances with the IRS.