IRS Collection

The IRS will generally initiate contact with taxpayers through regular mail using the U.S. Postal Service. Taxpayers can expect to receive letters and/or notices from the IRS. Additionally, under certain circumstances, the IRS may call or personally visit taxpayers. However, the IRS will not contact taxpayers by text, email, or through social media.

Yes. You can generally expect the IRS to issue a series of collection notices. Taxpayers should be mindful of the following notices/letters: Notice CP501, Notice CP503, Notice CP504, and Notice CP504B. Additionally, taxpayers should be aware of certain “final” notices before the IRS issues liens or levies: Letter 3172, Notice CP90, Notice LT11, and Letter 1058. For more information, see, e.g., You Received an IRS LT11 Notice (or Letter 1058), Now What?.

Yes. The IRS may issue a lien to secure the government’s interest in your property for unpaid taxes, penalties, and interest. The IRS may also levy or seize your assets, such as: wages, bank accounts, properties, and social security benefits. There are many potential options for the legal structure of a business entity. Further, the IRS may seize your federal tax refunds and apply them to your unpaid federal tax liabilities. For more information, see What You Need to Know About Federal Tax Liens and Levies.

Yes. Federal tax liens are expansive and attach to various properties and interests of taxpayers. The IRS will release a federal tax lien upon full payment of taxes, penalties, and interest. However, taxpayers may obtain other types of relief, such as: a discharge of property from the effect of the tax lien, a certificate of non-attachment, a certificate of erroneous lien, subordination of the tax lien, or withdrawal of the Notice of Federal Tax Lien. For more information, see Everything That You Need to Know About Federal Tax Liens.

Yes. If the IRS identifies your outstanding federal tax obligations as meeting the definition of “seriously delinquent tax debt,” the IRS may certify your tax debt and provide the information to the U.S. Department of State. In turn, the U.S. Department of State may revoke your passport and deny passport applications. For more information, see Passport Revocations Under Section 7345.

No. Many taxpayers cannot feasibly pay their outstanding federal tax obligations at once. Fortunately, taxpayers have certain collection alternatives, such as: an installment agreement, an Offer in Compromise (OIC), or Currently Not Collectible (CNC) status. The IRS generally assesses taxpayers’ collection alternatives based on their current financial status, analyzing their income, expenses, assets, and liabilities. For more information, see, e.g., Everything that You Need to Know about IRS Offers in Compromise.

Yes. Generally, the IRS has 10 years from the date of assessment to collect a tax liability. The “date of assessment” is the later of when the taxes were due (e.g., April 15^th) or when the tax return was filed. Taxpayers should also be aware that the 10-year statute of limitations may be extended in various circumstances, such as: filing for bankruptcy, submitting an Offer in Compromise (OIC), and requesting a Collection Due Process (CDP) hearing.

Yes, but timing is key. Once the IRS issues a final notice (e.g., Letter 3172, Notice CP90, Notice LT11, and Letter 1058), taxpayers generally have 30 days from the date of the IRS notice/letter to request a Collection Due Process (CDP) hearing. Taxpayers have a right to a CDP hearing with the IRS Independent Office of Appeals before levy action is taken. However, the IRS generally issues a lien before taxpayers request a CDP hearing. For more information, see The Benefits of Hiring Tax Counsel for a CDP Hearing

Yes, under certain circumstances. Under federal tax law, a third party can be held liable for the tax liability of another person. The IRS may hold a third party liable under various legal theories, such as: transferee liability, fiduciary liability, successor-in-interest liability, nominee liability, or alter ego liability. For example, if a taxpayer gives away his or her assets to another person to avoid IRS collection efforts, the taxpayer (transferor) will be primarily liable for the amounts due, but the third party (transferee) will be secondarily liable. For more information, see The IRS, Fraudulent Transfers, and Transferee Liability.

Possibly. Tax evasion is a federal crime. Merely failing to pay your taxes is not tax evasion. However, tax evasion often involves an affirmative act to conceal money or assets, and the punishment can include prison time. According to Section 7201 of the Internal Revenue Code, “[a]ny person who willfully attempts in any manner to evade or defeat . . . the payment [of any tax] shall . . . be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.” For more information, see The Crime of Tax Evasion.

A tax attorney can help guide you through tax disputes and defend you from IRS collection efforts. Tax attorneys are necessary any time that you need to have a “privileged,” confidential discussion with a tax professional. Additionally, because IRS collection efforts and your rights are time-sensitive, it is important to reach out to a tax attorney as soon as possible.