How Does the IRS Collect Past Due Unpaid Income Taxes?

Westport CT

22 July, 2021

12:15 AM

Description

Sometimes a taxpayer owes money to the IRS and can’t pay it. This situation often arises after the taxpayer files a tax return and doesn’t pay the balance due. Let’s discuss what happens after the tax return with an unpaid balance is filed. After filing, the tax liability is assessed by the IRS giving the IRS legal authority to collect the unpaid balance. If the balance owed is subsequently paid, the process is over. However, if the tax remains unpaid, the IRS will begin the process of trying to collect it. Initially, the IRS will send out a billing notice requesting payment of the balance due. If payment is not received within ten days of the date of that notice, a statutory lien arises, and if the amount owed is greater than ten thousand dollars, the IRS will issue a Notice of Federal Tax Lien to the taxpayer. This will put creditors on notice that an outstanding balance is due to the IRS. If the tax still remains unpaid, the IRS will issue a notice of intent to seize the taxpayer’s property and rights to property. This notice will also start the beginning of a 30-day appeal period. If the taxpayer does not appeal within that time frame, the IRS will issue levies and begin the process of seizing assets and/or garnishing wages. To prevent the IRS from seizing assets, it is critical to 1) get into tax compliance, 2) contact the IRS (or have someone do it for you), and 3) work out a resolution to the problem. Getting into tax compliance means making sure all tax returns for the past six years have been filed, and making sure that you are current on your withholding or estimated tax payments. Working out a resolution to the problem can be accomplished by either setting up an installment agreement allowing the taxpayer to pay the outstanding tax debt over a period of time not to exceed ten years, proposing an offer-in-compromise allowing the taxpayer to settle the outstanding tax debt for less than the full amount owed, or proving non-collectability by demonstrating that the taxpayer simply cannot pay based upon their financial circumstances. Determining which resolution alternative works best is something that I can help a taxpayer address. Dealing with the IRS presents various challenges. If you or someone you know has an unpaid IRS income tax liability and needs assistance in resolving it, please feel free to contact me, Steven R. Diamond, CPA, at 203-221-2700, or at my email [email protected]. Steven R. Diamond, CPA 191 Post Road W. Westport, CT 06880