If you’ve received a notice from the IRS or know you owe back taxes, it’s natural to feel stressed or unsure about what to do next. The IRS collection process can seem intimidating, especially if you’ve never dealt with it before. However, understanding how the process works—and the options available to you—can help you respond confidently and take control of your financial future.
At Sterbick and Associates Law Firm in Tacoma, we help individuals and businesses navigate IRS collections and resolve tax debts efficiently. Here’s a breakdown of what to expect from the collection process and how to address it effectively.
Step 1: Initial Notice from the IRS
The collection process usually begins with a written notification from the IRS, commonly referred to as a CP notice. This letter outlines:
- How much you owe
- The relevant tax year(s)
- Any penalties and interest
- A deadline for response or payment
It’s essential to read these notices carefully and take them seriously. Failing to respond can lead to harsher consequences, including additional fees or enforcement actions.
Key Tip: Always open and review IRS mail. Ignoring it won’t make the problem go away; in fact, it can escalate the situation quickly.
Step 2: Follow-Up Billing Notices
If you don’t take action after the initial notice, the IRS will begin sending follow-up billing statements. These notices show the growing balance, which includes accumulating penalties and interest. Typically, the IRS sends several of these over a few months.
The most critical notice in this stage is the “Final Notice of Intent to Levy.” This document warns that the IRS is preparing to seize your assets unless the debt is resolved or appealed within 30 days.
Pro Tip: If you receive a Final Notice of Intent to Levy, contact a tax professional immediately. You still have rights—but the clock is ticking.
Step 3: IRS Collection Actions
If the debt remains unresolved, the IRS can initiate various collection methods. These may include:
- Federal Tax Lien: A legal claim placed against your property (real estate, vehicles, or financial accounts), which can impact your credit and complicate selling or refinancing assets.
- Wage Garnishment: Also known as a wage levy, this allows the IRS to take a portion of your paycheck directly from your employer.
- Bank Levy: The IRS can freeze and withdraw funds from your bank account. Once the levy is in place, your bank must hold the funds for 21 days before turning them over to the IRS unless you resolve the issue in time.
- Asset Seizure: In rare and severe cases, the IRS may confiscate physical property like vehicles, homes, or other valuables to settle the debt.
Important Reminder: While these enforcement actions are powerful, you still have legal rights and opportunities to resolve the matter before they happen.
Step 4: Solutions for Resolving Tax Debt
Thankfully, there are several options available to settle your tax debt and avoid further consequences. These include:
Installment Agreements
Pay your balance in monthly installments over time. This is a common and flexible option, and in many cases, the IRS offers streamlined approval for lower balances.
Offer in Compromise (OIC)
If paying the full amount would cause financial hardship, you may be eligible to settle for less through an Offer in Compromise. The IRS considers your income, expenses, assets, and ability to pay when evaluating these offers.
Currently Not Collectible (CNC) Status
If you’re facing serious financial hardship, you may qualify for temporary protection from IRS collections. While CNC status doesn’t erase the debt, it gives you breathing room while your finances stabilize.
Innocent Spouse Relief
If your tax debt is due to mistakes or fraud committed by your spouse or ex-spouse on a joint return, you might qualify for relief from responsibility for that debt.
Note: Each program has strict eligibility requirements and documentation standards. The experienced team at Sterbick and Associates Law Firm can help determine which solution fits your unique situation and assist you in preparing a strong case.
Step 5: Know Your Rights as a Taxpayer
The IRS has powerful collection tools, but it’s also bound by a Taxpayer Bill of Rights. These include:
- The Right to Be Informed: You have the right to know what you owe and why.
- The Right to Challenge: You can appeal decisions you believe are incorrect or unfair.
- The Right to Representation: You’re entitled to work with a qualified tax professional or attorney.
- The Right to a Fair Process: The IRS must consider your financial condition and treat you justly throughout the process.
At Sterbick and Associates, we make sure your rights are respected and upheld every step of the way.
Don’t Wait—Act Sooner Rather Than Later
Delaying action on tax debt only increases the risk of wage garnishment, levies, and compounding interest. By addressing the issue proactively, you have more options and a greater chance of resolving your debt on favorable terms.
If you’re feeling overwhelmed, you’re not alone. Sterbick and Associates Law Firm, based in Tacoma, has helped countless individuals and businesses regain control of their finances and deal with the IRS head-on.
Understanding how the IRS collection process works is the first step in protecting yourself and resolving tax debt. Whether you’ve received a notice or are already facing collection actions, taking early and informed action is key to achieving a positive outcome.
