If you have unpaid tax debt, the Internal Revenue Service (IRS) can and will initiate collection efforts against you. There are several different types of collection actions that the government may take. For instance, the IRS may take money from future tax refunds, levy against your paycheck or your bank accounts, file federal tax liens against your home & large ticket assets, seize assets, and institute passport restrictions against certain taxpayers.
In May 2023, the IRS announced that it will resume its collection activities. Previously, these activities were paused as part of an emergency reaction to the COVID-19 pandemic. It is estimated that during May 2023, the IRS will send out millions of balance-due notices.
If you owe money to the IRS, get help from our Dual-Licensed Tax Attorneys & CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.
The IRS utilizes collection actions to recoup unpaid debt from taxpayers. In 2020, these actions were temporarily suspended during the COVID-19 emergency declaration.
However, in May 2023, the IRS will begin mailing balance-due notices to taxpayers again. Millions of these notices may be sent out starting this month. Furthermore, those who owe money should be prepared to receive phone calls from IRS agents regarding their outstanding balances. Thankfully, our Dual-Licensed Tax Lawyers & CPAs are prepared to help overdue taxpayers resolve their issues and avoid facing unfair penalties.
When you owe money to the IRS, they will send you a tax bill outlining the balance you owe, plus any penalties and interest being assessed against you. This bill will provide options for payment and identify a due date. If you fail to pay the bill by the established deadline, the IRS will send you a series of notices and a final bill demanding the payment owed.
If you ignore the final bill demanding payment, then aggressive IRS collection efforts may commence. The following are all types of actions the IRS can initiate against overdue taxpayers:
If you owe money to the IRS, they may elect to take money from your future tax refunds. Your later tax refunds may be applied to overdue taxes, interest, and any penalties you may face.
The IRS may also attempt to collect overdue tax debt by filing a federal tax lien against you. When the government files a tax lien, they are essentially making a legal claim against your property. The lien protects their interest in your property, including personal property, financial assets, and real estate. If you sell one of these liened assets the IRS collects against the proceeds up to the full amount of the sale.
Another way the IRS may collect unpaid taxes is by issuing a levy. If the government issues a levy, then they can seize your property. For example, the government may seize your house or other property, then use the profits from its sale to satisfy your debt. They typically sell at below fair market prices as well.
The IRS can issue a levy to actually take your property from you. This differs from a lien, which only secures the government’s interest in your property.
Finally, if the IRS classifies your unpaid tax debt as seriously delinquent, the government may issue passport restrictions against you. They may revoke your current passport, deny you a new passport, or refuse a passport renewal.
If you have unpaid tax debt, then the IRS cannot chase you forever. Generally, the government will have 10 years from the assessment date to collect unpaid taxes. After this 10-year period, the IRS can no longer attempt to collect an overdue balance. Still, there are certain things to remember regarding this rule.
First, you should note that the 10-year deadline for collecting unpaid taxes begins when the taxes were assessed. Accordingly, the applicable assessment date will be April 15th of the year the unpaid taxes were initially due, or the return at issue was filed, whichever occurred later. By filing your return earlier, you cannot reduce the time frame for initiating collection activities.
Furthermore, there are some instances where the 10-year time limit may be extended or tolled, such as cases where the overdue taxpayer left the country, filed an Offer in Compromise, or filed for bankruptcy. Also, if the time limit for commencing a collection action is close to expiring, then the IRS may file a lawsuit against you in U.S. District Court requesting an additional 20 years to collect. Still, these lawsuits are rare, and the government usually does not want to spend the resources to sue you in federal court unless you owe millions of dollars. In general, the larger the dollar amounts in issue the more likely the IRS is to file for the additional time.
The IRS typically wants to work with delinquent taxpayers before actions such as levies and liens. You must maintain communication with the government throughout the process of finding a resolution in your case.
If you believe that an IRS bill is inaccurate, you may call the phone number listed on the bill or talk to a local IRS office. Alternatively, you authorize our legal team to communicate with the government on your behalf. Our Dual-Licensed Tax Lawyers & CPAs can help resolve any issues regarding an improper tax bill.
If your bill is accurate, but you cannot pay the entire balance immediately, you may still be able to avoid collection. For instance, you can establish an installment agreement. An installment agreement is a sort of payment plan that permits you to resolve your debt over time.
Finally, there are other methods for avoiding collection actions, such as pausing collection and attempting to reach an Offer in Compromise. An Offer in Compromise allows you to settle your tax debt for less than the balance owed.
Be very careful about following overly aggressive advice on avoiding a collection action or you might commit income tax evasion, which is a felony. Income tax evasion can be committed in the assessment process or the collection process by hiding assets or sources of income from IRS collection assets.
Seek support from our Dual-Licensed Tax Attorneys & CPAs at the Tax Law Offices of David W. Klasing by dialing (800) 681-1295.