IRS’ Methods of Collection of Tax Debt

Last updated on August 28, 2022

The IRS begins the collection process for tax debt by sending notices to taxpayers with details of the amount owed and repayment options available. Taxpayers that resolve their tax debt avoid any additional problems but those who ignore or do not make efforts to resolve the back taxes risk aggressive collection actions.

The IRS has the legal power to freeze bank accounts, seize property and/or assets and sell them to satisfy a tax debt. Some of the most aggressive IRS collection methods include a tax levy. It is only when the IRS has exhausted all other options to recover back taxes that they move to a levy where they seize funds from a bank account or wages from a pay check.

When the IRS freezes a bank account, the goal is to recover as much of the tax liability as possible, and to force the taxpayer to confront their back tax issue. A wage garnishment is another method of the IRS trying to recover back taxes where it instructs the employer to deduct a pre-determined amount from a taxpayer’s wages so that the tax debt can be fulfilled. In some extreme cases, the IRS takes the entire wages.

The IRS is not always correct in its assessment of back taxes owed. Sometimes, it makes mistakes in auditing the amount of tax debt. A taxpayer can challenge the claims of the IRS and/or take the case to court if they believe the IRS’ actions are unjust and unlawful. Taxpayers must be aware of their responsibilities and rights to stay compliant and protect themselves.