How IRS Collects Tax Debt

Last updated on October 12, 2021

When taxpayers get into tax debt, they need to be looking for ways to get out of it because the IRS can anytime begin collection action. The IRS first sends notices regarding unpaid taxes. If taxpayers ignore or refuse to pay their tax debt after receiving notices from the IRS regarding debt payment, the IRS may place a tax lien or a tax levy to recover taxes owed.

Under tax lien, the IRS may claim the property of a taxpayer to secure payment of tax debt. Under tax levy, the IRS may seize and may sell the property of a taxpayer to fulfill the tax debt. Taxpayers may note that apart from real estate, the IRS may also claim, seize and/or sell a taxpayer’s wages, dividends, rental income, bank account(s) or any property that is owned by taxpayers, but is held by someone else.

Once a lien or a levy is placed, it is difficult to stop it. In such complicated tax cases, taxpayers may take the help of tax resolution companies that house competent tax attorneys or enrolled agents to resolve the lien or the levy. The tax help will also match taxpayers with the appropriate IRS tax debt payment program.

The IRS has four tax debt payment plans namely Currently Not Collectible, Offer in Compromise, Installment Agreement and Partial Payment Installment Agreement. Before choosing and applying for a tax debt payment program, taxpayers may consult a tax specialist.

Most taxpayers take outside help for negotiating the terms and conditions of a tax debt payment plan to achieve a resolution that is advantageous for them. It is best for taxpayers to resolve their tax debt as soon as possible to avoid IRS collection actions.