What Happens When You Are Now In Tax Collections
I’m In Tax Collections
If you are in tax collections, paying your tax debt as soon as possible is in your best interest to get this weight off your shoulders and limit the growth in penalties and interest.
If you can’t pay your tax collections on your tax debt in full, the IRS and State tax authorities offer several payment options. The options will vary depending on whether you are dealing with an IRS or state tax debt (more specifically, which state) and the facts and eligibility of your situation. Depending on the type of tax you owe, how much, and the taxing authority, different options may be available, ranging from a short-term extension, installment agreements or payment plans, currently-not-collectible status (uncollectible status) to an offer in compromise to settle your tax debt for less than what is owed.
IRS Payment Plan
A payment plan (also known as an installment agreement) is the most common option for dealing with a tax collection issue when you can’t pay. However, the crux is that before you can enter into an installment agreement with the IRS, and generally for most states, you need to be in full compliance. In other words, all your tax returns must be filed and processed by the tax authority.
If you are facing financial hardship, one of the most favorable tax resolutions is to have your tax collection case in uncollectible status. Despite what you hear on the radio or on TV about being able to settle your tax debt for “pennies on the dollar,” it is genuinely not common for taxpayers to qualify and to get approval from the IRS or State for such a settlement. An offer in compromise is significantly more challenging to qualify for and to get approval.
Options on what will work for you in resolving your tax collections issue generally will depend on how much you owe. And your current financial situation (i.e., ability to pay). Each option has different criteria, and some have fees for requesting in addition to any representation fees that you may pay a tax resolution services professional.
You must be proactive to have the most and best options available to resolve and eliminate your tax collections activity. Taking action as soon as possible helps ease your stress with the least amount of pain and expense.
If the IRS or State determines that you owe taxes, they can garnish your wages, file and record a lien against your property, seize your assets, and levy your bank accounts. If you owe taxes to the IRS, the following information will help you understand the tax collection process.
The most important thing when dealing with tax collections or any other tax issue is to take action!!!
Understanding The Tax Collections Process
If you do not pay your tax in full when you file your tax return, you will receive a tax notice (i.e., a bill) for the amount you owe. This first notice you receive will be a letter explaining the balance due and demanding payment in full. It will include the amount of the tax plus any penalties and interest accrued on your unpaid balance from when the tax was due.
This bill or notice starts the collection process, which continues until your account is satisfied or until the IRS or state may no longer legally collect the tax. For example, when the time or period for collection expires. While the IRS has a statute of limitations in which collections can expire, many states have no statute of limitation – meaning collection efforts will continue and remain on their books forever…
When a tax bill is sent to you, the account becomes delinquent if you do not respond to the first notice or subsequent notices. Delinquent accounts will eventually lead to more enforced collection action.
It Is Essential To Be Proactive
It is essential to be proactive and make arrangements to pay the tax due voluntarily. If you do not contact the IRS or the state, they may take more aggressive tax collection actions to collect the taxes. For example, they may:
- File a Notice of Federal Tax Lien or State Tax Lien
- Serve a Notice of Levy
- Offset a federal or state refund
- Levy your bank account or garnish your wages
- And more
Even if a taxpayer works out a payment solution with the tax authority, it may file a tax lien to secure the government’s interest. The lien establishes priority for the IRS as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate.
A tax lien is a legal claim to your property, including property that you acquire after the lien arises. The IRS or state may also file a tax lien in the public records, which publicly notifies your creditors that the tax authority has a claim against all your property, including property acquired by you, after filing the tax lien.
Notice Of Federal Tax Lien
The filing of a Notice of Federal Tax Lien or Notice of State Tax Lien may appear on your credit report and may harm your credit rating. Therefore, it is essential that a taxpayer work to resolve a tax liability as quickly as possible before lien filing becomes necessary. Once a lien arises, the tax authority generally cannot release the lien until the tax, penalty, interest, and recording fees are paid in full or until the tax may no longer be legally collectible.
Additional enforcement action could include serving a notice of levy to attach taxpayer income such as wages, social security benefits, and retirement income or assets such as bank accounts. Sometimes, the IRS or state will take enforcement action by seizing and selling property.
In addition, any future federal tax refunds or state income tax refunds you are due may be seized and applied to your tax liability. These actions occur only after allowing the taxpayer to voluntarily pay the debt, make arrangements to pay, or supply information to show that payment would create hardship.
You can also appeal most tax collection actions before and after a specific action takes place. However, there are often strict deadline requirements.
Peace Of Mind Tax Help Tax Resolution Support
One of your most important rights as a taxpayer is to have a qualified tax resolution professional, such as an Enrolled Agent (EA), represent you in front of the IRS and/or States and provide collections support.
When you hire Peace Of Mind Tax Help to represent you with a tax collections issue, we will guide you through the collection process while advocating on your behalf and protecting your interests.
Depending on the matters involved and the tax resolution option, your collection case may remain open anywhere from a couple of months to several years. However, as our client, our focus is on resolving your issue as quickly and efficiently as possible.
Peace Of Mind Tax Help is here to help you because when you’re dealing with a tax collections problem, the worst thing you can do is do nothing at all. The best decision is to take the necessary first step and to get help now!
If you cannot resolve your collections problem without help, you can get help from the tax resolution professionals at Peace Of Mind Tax Help.
Please take a look at additional information and advice on some of the more common tax collection resolutions available:
- Installment Agreement
- Innocent Spouse Relief
- Injured Spouse Relief
- Currently Non-Collectible
- Offer in Compromise
- Collection Appeals
Click on the “Get Peace Of Mind” button at the top of the page to take that first step.