Topic 201 - The Collection Process
If you do not pay in full when you file, you will receive a bill. This
bill begins the collection process, which continues through alternative
payment options and ends when your account is satisfied.
The first bill you receive will explain the reason for your balance
due and require payment in full. It will include the tax due plus
penalties and interest that are added to your unpaid balance from
the date your taxes were due. You can pay this bill by sending the
IRS a check or money order payable to United States Treasury with
your notice. To pay by credit card, call 18002729829 or 18887291040.
If you cannot pay the balance in full, you should pay as much
as you can with the notice. Refer to
Topic 202,
What To Do If You Can't Pay Your Tax, for alternatives
available for paying the remaining balance. The unpaid balance is
subject to interest which is compounded daily and a monthly late
payment penalty. Therefore, it is in your best interest to pay your
tax liability in full as soon as you can to minimize the amount
of interest and penalty charged. You might also want to consider
a cash advance on your credit card or a bank loan. The interest
rate your credit card issuer or bank charges may be lower than the
combination of interest and penalties imposed by the Internal Revenue
Code. It may also keep your tax debt from negatively affecting your
credit rating.
If you are unable to pay your balance in full, we may be able
to offer an individual payment plan based on monthly installments.
Complete and mail an Installment Agreement Request,
Form 9465
(PDF), with your bill. You can attach a voided check to your request
to have your payment deducted from your bank account each month.
Direct debit installment agreements provide you with the ability
to make timely payments automatically, therefore reducing the possibility
of defaulting the agreement. Some installment agreements can also
be established over the telephone. Refer to
Topic 202,
What To Do If You Can't Pay Your Tax, for more information.
If you are experiencing a significant financial hardship and are
unable to currently pay anything, we may temporarily suspend collection
on your account. Interest and late payment penalty will continue
to accrue while you make installment payments or while collection
is suspended. In addition, if you are a member of the Armed Forces,
you may be able to defer payment of income tax that becomes due
before or during your military service if your ability to pay is
materially affected by your military service. For more information,
see Publication 3, Armed Forces' Tax Guide, which
may be obtained by accessing our web site.
Once all payment options have been considered and it is determined
that you do not qualify for an installment agreement, you may opt
to file an offer in compromise. An offer in compromise (OIC) is
an agreement between a taxpayer and the IRS that resolves the taxpayer's
tax liability. The IRS has the authority to settle, or compromise,
federal tax liabilities by accepting less than full payment under
certain circumstances. The IRS resolves less than 1% of its balance
due accounts through the offer program. For additional information
on the program and how you may qualify for consideration, refer
to Topic 204,
Offer in Compromise.
When you contact the IRS, you should be prepared to discuss your
basic income and expense information. To prepare, gather together
all of your information about your income, assets and necessary
living expenses, such as your most recent pay stubs, rent or mortgage
payment amounts, transportation expenses, etc. This will allow us
to assist you most effectively.
It is important to contact IRS and make arrangements to pay the
tax due voluntarily. If you do not take some action to pay your
tax bill or contact us to make arrangements to settle the account,
we may take enforced collection actions to secure payment.
Some of the actions we may take to collect taxes include:
- Filing a Notice of Federal Tax Lien,
- Serving a Notice of Levy; or
- Offset of a refund.
We will describe each of these actions in further detail.
By filing a Notice of Federal Tax Lien, the government establishes
its interest in your property as a creditor. The lien is a claim
against your property, including property that you acquire after
a lien is filed. The lien is required by law to establish priority
as a creditor in competition with other creditors in certain situations,
such as bankruptcy proceedings or sales of real estate. Once a lien
is filed, it may appear on your credit report and it may harm your
credit rating. Therefore, it is important that you work to resolve
your tax liability as quickly as possible, before lien filing becomes
necessary. Once a lien is filed, the IRS generally cannot issue
a "Certificate of Release of Federal Tax Lien" until the taxes,
penalties, interest, and recording fees are paid in full.
A Notice of Levy is another method the IRS may use to collect
taxes that are not paid voluntarily. This means we can, by legal
authority, take and sell property to satisfy a tax debt. This could
include your wages, bank accounts, Social Security benefits, and
retirement income. If your tax liability remains unpaid, the IRS
may also levy assets such as your car, boat, or real estate.
In addition, when you have an outstanding tax liability, any
future federal tax refunds that you are due will be offset by the
amount you owe. Any state income tax refunds you are due may also
be levied, and the proceeds applied to your liability.
If you believe the bill is inaccurate, write the IRS office that
sent you the bill, or visit your nearest IRS office. To help us
correct a problem, please include a copy of the bill and copies
of any records, such as the front and back of canceled checks or
money orders, or other information that will help us understand
what you believe is wrong. Please do not send your original documents.
You may also call the IRS at 18008291040 to discuss why you disagree
with the bill. Please have the bill and your records at hand when
you call.
You have rights and protections throughout the collection process.
Please refer to
Publication
1, which provides additional information on Your Rights
as a Taxpayer. More information on the collection process
is available in
Publication 594
(PDF), What You Should Know About The IRS Collection Process.
These may be obtained by accessing our web site at www.irs.gov.
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