You owe the IRS money, and suddenly, every envelope in the mailbox looks ominous. Before you start saying your goodbyes to your paycheck, bank account, and maybe even the couch, don’t let your anxiety fool you. The IRS collection process doesn’t happen overnight.
First, check your mailbox
Once the IRS assesses what you owe, it sends a notice explaining your balance and requesting payment. That balance includes your unpaid taxes plus penalties and interest, which keep growing until you pay.
If you get that notice, open it. Check the amount and the deadline, and plan to pay what you can. If something looks wrong, take action: call the number on the notice, visit an IRS office, or file an appeal.
What you shouldn’t do is stash the notice in a drawer. You may forget about it, but rest assured, the IRS will not.
Your stuff isn’t going anywhere yet
This is usually where the anxious mind jumps ahead a few chapters. You get the notice, you don’t pay it, and suddenly the IRS is taking your paycheck or the device you’re reading this on. But the IRS collection process has several steps before it gets anywhere near that point.
A tax lien is a legal claim against your property. If the IRS files a Notice of Federal Tax Lien, it becomes public record and can make it harder to get credit.
A levy goes further. That’s when the IRS actually takes money or property to satisfy your debt. But even that doesn’t happen without warning. The IRS generally must send a Final Notice of Intent to Levy and give you at least 30 days to request a hearing before moving forward.
Here’s what your anxiety left out
The IRS has some pretty heavy tools in its arsenal. But there’s a long road between “I owe back taxes” and “the IRS is coming to collect.”
And you have more control over what happens along that road than you think.
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There’s still time to change course
You don’t have to wait around to see how far the IRS takes the collection process. Depending on your situation, you may be able to set up a payment plan, settle your debt through an Offer in Compromise, or temporarily delay collection if paying would keep you from covering basic living expenses.
The best option really depends on how much you owe and how much you can realistically afford to pay. But the important part is that you do something.
Even the IRS has boundaries
Worst-case scenario: you’re facing a levy. Even then, the IRS doesn’t get unlimited access to everything you own.
Certain property is protected from levy, including necessary clothing, schoolbooks, some household belongings, and a portion of your wages. And seizing your primary home is a much bigger deal than just sending a letter to your bank. The IRS generally needs court approval and must show there isn’t a reasonable alternative for collecting the debt.
So, no, an IRS debt doesn’t automatically mean you’re losing your house, your paycheck, and everything that isn’t nailed down.
Know your rights
When you owe back taxes, it feels like the IRS holds all the power. It doesn’t, and it’s important to know your rights. The Taxpayer Bill of Rights includes the right to know what the IRS is doing and why, pay no more than the correct amount, challenge the IRS’s position, appeal decisions, and retain representation.
If a notice doesn’t make sense, you disagree with the amount, or the whole process is beyond your DIY comfort level, ask questions or get professional help. You don’t just have to nod and agree with everything the IRS says.
Here’s where things get scary
Confronting your back taxes head-on isn’t the scariest thing you can do. Ignoring the IRS is.
One notice isn’t the end of the world. But repeatedly ignoring notices, missing deadlines, and refusing to deal with your back taxes can move you further into the collection process – and closer to the liens and levies you were worried about in the first place.
So take the IRS letter out of the junk drawer or quit using it as a coaster. Read it, check the deadline, respond, or get help if you need it. Don’t wait for the IRS to make the next move – make yours first.
