No matter how much you protest, there is no avoiding the inevitability of taxes. When you fail to file or pay your taxes, you can count on the fact that sooner or later, the IRS will come to collect. The IRS Collections Office won’t hesitate to put a lien on your home, garnish your wages, or take similar actions to recoup their losses. It may take years, but there is a high likelihood that the IRS will collect. It’s best to avoid allowing your tax debt to get out of hand and take action before the IRS starts sending you notifications. However, surprise life expenses, like medical bills, can often cripple the typical American family’s finances—resulting in delinquent taxes. As stressful as the situation may be, there are still solutions and ways to resolve your current position with the IRS.
IRS Statute of Limitations on Collections
While it’s fairly uncommon, there is a way to completely avoid having to avoid IRS debt collections—without having to pay a cent. The IRS statute of limitations on collection is limited to a 10 year period from the date that you receive your notice.
Waiting out the statute of limitations is a risky move because the IRS may end up seizing your property and assets in order to collect what they are owed in the process. Depending on your financial standing at the timeline of collections, waiting out the statute of limitations on collection may be the best approach. However, you should seek the advice of a tax professional before attempting to wait out the IRS statute of limitations on collections.
IRS Collection Process Timeline
When it comes to dealing with tax debt, it’s important to understand the IRS collection timeline so that you can use it to your advantage. When you become delinquent on your taxes, or you are proven to owe additional funds as the result of an audit, the IRS will send you notifications explaining why, and how much you owe. This is the first step of the IRS collections process. If possible you should contact the IRS to either pay or notify them that you are unable to pay as soon as you are notified. If you ignore the IRS, they will continue to send notifications until you receive a final notice. After your final “warning” the IRS may notify you that they intend to put a lien on your property, garnish your wages, seize your assets, or freeze your accounts.
Once you’ve received a notice to lien or a similar letter that falls in line with IRS collection standards, it’s vital that you take action immediately. Upon receiving a notice to lien, you will have 21 days to dispute it before the IRS takes action. If you fail to dispute their claim or ignore the notice, the IRS collections office will begin the process of seizing your assets or whatever action they have notified you of.
It’s essential that you take action during the 21-day window of opportunity in the IRS collection process timeline; once the IRS has seized your assets (wages or otherwise), they are exceptionally difficult to get back.
Finally, the IRS statute of limitations on collections states that the federal government has a 10 years to collect before your debts are absolved.
IRS Collection Standards
Fortunately, you won’t be left to guess what the IRS will do when you owe them money, or the standards by which they operate. Here is a list of things you should know and can expect when it comes to IRS collections standards:
- Collecting your IRS tax debt is a priority for the federal government, and they may take action in the form of seizures and liens if their debt goes unpaid. However, it’s standard procedure that the IRS give you ample notice before taking action.
- A “Notice of Federal Tax Lien” may be filed in your name, or your businesses name, attaching to any and all assets you or your business owns or is attached to. In terms of property and financial accounts, nothing is off limits that have your name attached to it.
- You have the right to appeal to the IRS and even take your case through the court system. You are also entitled to legal representation at all times and representation from a qualified tax professional during the auditing process.
- You can appeal most actions taken by the IRS before and after the fact. However, there are often strict regulations in regards to the appeals process—one of the many reasons it’s so important to pay close attention to notices and stay in close contact with the IRS.
In general, the IRS is not out to get you; they are people simply doing their jobs and enforcing the law. Because of this, IRS tax representatives are often willing to work with you and possibly reduce the amount of money you owe if you cooperate. You may be able to achieve a “currently not collectable status” allowing you to defer your taxes for a year or so.
Offer in Compromise
If you’re in debt with the IRS for a significant amount of money, and there’s no reasonable way to pay it back all at once, you may qualify for an offer in compromise. In some cases, it may be more costly for the IRS to recoup their losses through liens, seizures, and garnishments, than it is to offer you a reduced amount in compromise. Typically, the IRS will request that you file a Form 433-A so that they can create an affordable payment plan once you’re offer in compromise is approved. However, the IRS is under no obligation to reduce the amount that you owe them, and not everyone will qualify. It’s vital that you seek the help of a tax professional before meeting with the IRS—the knowledge and expertise of a CPA or tax attorney could end up saving you hundreds to thousands on your back taxes.
Don’t struggle to make heads or tails of complicated IRS forms and notifications—Community Tax’s team of exceptional tax professionals can assist you with all of your IRS related needs. When it comes to IRS debt collection, time is of the essence. Don’t hesitate to contact us as soon as you receive your first notification from the IRS.