Understanding the IRS Collection Process

The IRS expects every Washington DC taxpayer to file their returns by mid-April. Failure to file can result in quite some legal and financial consequences, including penalties, loss of refunds, and jail time in extreme circumstances.

If you file your tax returns in time but fail to pay what you owe the IRS, the agency may initiate a collection process. At other times, you could think you have done everything right but still have the IRS start a collection process against you. This guide looks into what the IRS collection process entails, and the role played by IRS lawyers in the process.

Notice of Balance Due

After filing your returns, the IRS reviews them to determine everything is as it should be. If there are outstanding dues, it notifies the taxpayer through IRS Notice CP-501, 502, or 503, stipulating how much you owe, the due date for making the payments, and consequences for non-payment, including applicable interests and penalties.

In cases where the amount owed is large, the IRS may skip this step and go straight to taking further actions, in which case the intervention of an IRS lawyer can be critical. If the taxpayer fails to pay up or doesn’t enter any payment agreements with the IRS, the process moves on to the next step.

Intent to Levy and Federal Tax Lien Notice

This step comes in the form of an intent to levy notice. Intent to levy notice is a letter sent by the IRS stating its intent to seize a taxpayer’s property to offset their outstanding tax debts. This letter is sent strictly via certified mail to the taxpayer’s last known address. The IRS is not required to prove that the taxpayer received this letter.

The federal tax lien can follow shortly after the intent to levy notice or vice versa. A federal tax lien is a letter stating that the IRS has permission to possess your property to cover your unpaid taxes. Properties on which the IRS can place a lien include wages, 401Ks, home car, and other assets, and state income tax refunds.

Having a lien on your property doesn’t mean the government will seize and sell your property. However, it can be an inconvenience. For example, it can limit your ability to sell or refinance your property. However, you should not ignore a lien forever. Eventually, the government could seize and sell your property to recover owed funds.

Avoiding the Process

You can do several things to avoid going through the collection process. The most straightforward option is paying off what you owe, subject to your ability to afford it. The second-best option is to negotiate a payment plan. Lastly, you can file for an offer in compromise. All these options have their pros and cons. Also, different situations call for different approaches, where a tax professional’s input, such as that of an IRS lawyer, becomes critical.

“Owing the IRS money is a nightmare every taxpayer wants to avoid. So, you want to double-check everything before filing your returns and have experts help you. But even the most careful can still find them in trouble if the IRS makes mistakes. The good news is with the right help, there is a way out,” says Washington D.C. IRS lawyer John Pontius of Ponitus Tax Law.

If you believe that you do not have any outstanding debts and your case results from an IRS error, working with a lawyer can help you prove your case before it results in complications.