Pass the Due Date

What if you Can Not Pay The Amount Due?

If you file a tax return and do not pay your tax amount due at the time of filing, you will receive a notice for the amount you owe. This is also true when you don’t file a tax return. The IRS will perform what’s called a Substitute for Return (SFR), which means they will file a tax return for you to determine the amount that is owed. The SFR filing will not take into consideration deductions, credits or any different filing status other than single. You will be taxed at the highest rate. An SFR will in most cases result in a balance due. Once the first notice of a balance due is generated, the IRS Collection process begins.
IRS Collection Process

These collection actions will continue until your account is paid in full or until the 10- year time period that they have to legally collect the tax liability, expires. Instantly after the income tax filing date for each year, April 15, the IRS will start to add penalties and interest to any unpaid balance that is owed. Penalties and interest are continually added until the entire liability is paid in full. Even if you properly submit an extension of time to file your tax return, it does not mean that you have an extension to pay the balance that is owed.

IRS Collection Process

What Happens If You Do Not Pay The Amount Due?

If your tax filing results in a balance due to the IRS and it is left unpaid, you will receive the first notice of taxes owed. This notice will detail out the overall amount you owe, which year it pertains to and give you instructions on how to make proper payments. It will be in your best interest to pay your tax liability in full, as soon as you can, to avoid the added interest and penalty charges. However, like most taxpayers that option is not always available.

Coping with the IRS Collection process is one of the cruelest emotional and financial stress that one can endure. If you do not secure a way to obtain funds and pay the IRS what you owe, they can take drastic measures such as garnish your wages, seize your assets or levy the funds in your bank account. There is good news though, IRS Collection actions can be controlled as long as you make an effort to contact the IRS. If you are simply unable to pay the tax liability that you owe, there are other steps you can take to ensure that the IRS will not use severe collection action against you. Do not wait for the IRS to force the severe collection actions on you, be proactive in resolving your account as soon as the problem is made aware.

IRS Collection Deadline

Once the first notice is issued, the IRS will give you a deadline in which the balance must be paid in full. If you are unable to pay the amount in full by the deadline, the next step for the IRS Collection process will be to file a notice of federal tax lien. By filing a lien, the IRS makes certain that if you were to liquidate an asset or sell real estate, they will be entitled to receive proceeds that will pay your tax liability in full. The IRS tax lien will be filed and visible in public records at any given time. This is hurtful to you because your credit rating can hugely drop once a lien is filed. If there is no resolution made or no payments sent after many attempts to contact you,
IRS Collection Process

the IRS will issue a final notice called a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. After this notice is successfully sent, the IRS will take matters into their own hands and aggressively take collection action against you to ensure payment. Some of these actions include bank levies, garnish your wages, seize your property such as cars, real estate, investment account or basically anything they find out that you own. They will sell your assets to satisfy the tax liability that it owed.

IRS Collection Process

When A Third Party Is Involved

Most of the IRS Collection methods were handled within their own units but as recent as 2015, the IRS became authorized to use private liability collectors. The use of the third-party liability collector is to help the IRS generate more tax revenue with a less aggressive approach. If your account has been assigned out to a third-party liability collector, you may be contacted by mail or by telephone. When assigned, the third party will send you a letter that has a special collection code on it. This code must be used when you call to resolve your tax liability. This code is also an authentication way to know that they are speaking with the person who is responsible for paying back the liability.

Most of the time you can come to an agreement with the third-party liability collectors based on their programs. If you feel that it would be best to resolve your case directly with the IRS, you can make a written request to have your account transferred back.

How Much Can You Pay?

Working with the IRS allows you obtain a specific resolution that the third-party liability collector may not offer. It is always best to consult a tax attorney or trained tax expert to advise you of the best option for you. When dealing with the IRS directly, you have the opportunity to detail out your financial status through the use of Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. This financial form can determine whether you qualify for a reduced settlement, known as an Offer in Compromise. The form can also be used to determine your payment ability for other payment options such as an Installment agreement. If you’re simply living paycheck to paycheck and do not have any way of paying back the taxes due, then you can also look into a possible currently non collectible status.