Understanding The IRS Collection Process And Legal Notices
Understanding The IRS Collection Process And Legal Notices
January 11, 2024
If you have ever failed to settle your tax debt on time, you are already aware of never-ending legal notices. The IRS collection process begins as soon as the due date to pay your tax balance passes. Initially, the IRS sends out only legal notices to taxpayers who have outstanding federal tax liabilities.
However, very soon, the Internal Revenue Service unleashes its full authority to enforce tax collection. Nonetheless, we are here to walk you through the IRS collection process and shed light on options at your disposal if you cannot settle your debt in one go.
Understanding the IRS collection process
Firstly, you should be aware that failing to pay your taxes on time accrues interest and penalties. There is no way around it. Now let’s break down the IRS collection process.
CP14
The first letter you will receive is the CP14. It is known as the “Balance Due and Demand for Tax Notice.” Right after you receive this notice, you are liable to pay, including penalties and interest. Additionally, failing to comply will have severe consequences for the taxpayer.
CP503
Within 10 weeks, the IRS sends the 2nd reminder notice. By this point, you should have reached an agreement with the IRS or paid your taxes in full. Also, to apply for the IRS Fresh Start initiative you should pursue professional assistance.
Notice of federal tax lien
The IRS will send out a couple more legal notices before issuing a notice of federal tax lien. This notice alerts the creditors that you are behind on your taxes and the government might seize your assets to settle tax liability. As a result, you will find it extremely hard to get a loan, mortgage, or even lease.
The IRS states:
It’s important to contact us and make arrangements to pay the tax due voluntarily. If you don’t contact us, we may take action to collect the taxes. We may file a Notice of Federal Tax Lien in the public record to notify your creditors of your tax debt.
Levy
If you still kept neglecting all the notices, including the Final Notice, the IRS’s last resort is to impose a levy. The IRS may seize assets such as wages, bank accounts, Social Security benefits, and retirement income. Furthermore, the IRS also may seize your property (including your car, boat, or real estate) and sell the property to satisfy the tax debt. In addition, any future federal tax refunds or state income tax refunds that you’re due may be seized and applied to your federal tax liability.
Withdrawing the notice of federal tax lien
As mentioned previously, a federal tax lien damages an individual’s ability to get loans on normal interest charges. In some cases, it is also possible that your loan request will be denied altogether. However, the IRS may withdraw a Notice of Federal Tax Lien even when you still owe the tax debt.
If the IRS determines:
Circumstance |
Explanation |
| The Notice of Federal Tax Lien was not filed according to IRS procedures | The lien filing did not adhere to the proper IRS procedures. |
| You entered into an installment agreement to satisfy the liability | If an installment agreement was established and it did not include provisions for the Notice of Federal Tax Lien. |
| Withdrawing the Notice of Federal Tax Lien will allow you to pay your taxes more quickly | Removing the lien will facilitate a faster resolution of your tax payments. |
Exploring options to settle tax debt
If you keep evading taxes, you cannot blame the IRS for taking away your assets or freezing your funds. However, if you are interested in overcoming your tax liability, there are a few options you might be eligible for.
But before we find that, you need to hire LifeBack Tax Relief consultants for expert advice. We have been in the business for over 12 years and understand the complex processes inside out. With us, you will get the best possible deal, given your circumstances.
Bank loan
In contrast, tax interest costs more than interest on any bank loan. Hence, if you can afford to get a loan from a bank to clear your tax liabilities, it is a convenient option.
Installment agreement
Within 10 weeks, the IRS sends the 2nd reminder notice. By this point, you should have reached an agreement with the IRS or paid your taxes in full. Also, to apply for the IRS Fresh Start initiative you should pursue professional assistance.
For taxes under $100,000
If you’re not able to pay your balance in full immediately, you may qualify for a payment plan. Individuals who owe less than $100,000 to the IRS are eligible for a short-term payment plan of up to 180 days.For taxes above $100,000
However, if you cannot pay your debt in 180 days, you may qualify to pay through an installment agreement. But you should keep in mind that the installment agreement is subject to meeting the eligibility criteria.
Offer in Compromise (OIC)
If any taxpayer reaches an OIC agreement with the IRS, their tax amount is reduced to an agreed sum. At the same time, to apply for OIC, taxpayers must have filed all the tax returns for the current year. To check whether you are eligible or not, you may use the Offer in Compromise Pre-Qualifier tool – available on the IRS’s official website.
Currently not Collectible (CNC)
Moving on, you can request the IRS to report your account as CNC. This doesn’t mean that the tax debt goes away, the IRS temporarily suspends tax collection actions. In this case, the IRS does not pursue tax collection until your financial situation improves. Additionally, interest and penalties keep accumulating to your total debt until the debt is finally settled.
Partner with LifeBack Tax Relief
Partnering with Lifeback Tax Relief will accelerate you towards a prompt solution. Our experts will ensure that your tax liability is reduced to the maximum. Also, with us on your side, you do not need to worry about the complex tax processes. With a keen eye for detail, our experts will submit your documentation and application for any fresh start initiative without any errors.
Tags :
Currently not Collectible,Federal Tax Liens,Internal Revenue Service,Lifeback Tax,Offer in Compromise,Taxpayers
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