A Peek Into the IRS's Federal Tax Collection Processes

The Internal Revenue Service (IRS) federal tax laws give the IRS a wide range of collection resources that no other government agency has. In fact if you owe money to the IRS, you should be aware that the IRS is the most powerful collection agency in the world. Unlike other organizations or agencies, the IRS generally does not need to get a judgment against you before they start seizing assets or begin taking money from your paycheck or your bank account. They satisfy this requirement simply by calculating the amount of tax they believe you owe and notifying you with a series of tax bills and collection letters. The following is a list of notices you will receive when the IRS is attempting to collect a debt from you:

Collection Letters

The IRS always starts their collection process with a series of collection letters. The letters become more demanding with time, so it’s best to contact them as soon as possible to work out a payment schedule. If you ignore the letters, the collection process will escalate.

Phone Calls

If you do not respond to letters sent to you by the IRS, they will generally start calling you and will demand that you pay the tax due in full. Be aware that you have the right to negotiate alternative payment plans with the IRS.

Also, if you believe the IRS has not properly examined your tax liability, you should contact a tax professional. Typically, the IRS will still require payment and will adjust any overages as tax credits for future tax bills.

Wage Garnishments

One of the IRS’ favorite collection tools is that of a wage garnishment. If you ignore requests by the IRS to pay taxes that are due to the federal government, they may contact your employer and instruct them to withhold money from your salary or paycheck. If this happens, you should contact the IRS immediately and try to negotiate a settlement or payment schedule.

Bank Levies

Another popular collection tool for the IRS is to levy your personal checking or savings account. When the IRS places a levy on your account, monies or funds that are in your account are frozen and cannot be withdrawn by you. Generally, the money will be frozen for approximately 21 to 30 days before it is handed over to the IRS.

Federal Tax Liens

If you own real property or a home, the IRS will place a lien on the property. By placing a tax lien on the property, you will not be able to sell or transfer the property without first satisfying the lien. Therefore, if you to attempt to sell your home, many banks will not provide financing to a potential buyer until the lien has been cleared. Furthermore, you should also understand that once a lien is placed on your property, the IRS does have the option of actually foreclosing your property and selling it at auction to recover the amount of federal tax that is due to them.

Asset Seizures

Besides the above mentioned collection methods, the IRS also likes to sometimes seize expensive assets such as heavy machinery and automobiles. If you continue to ignore payment demands and requests by the address, they may simply issue a seizure request for your car or truck. If they do, the IRS will confiscate your vehicle and sell at public auction and apply proceeds to the tax that you owe.

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