IRS Collections for Income Tax Debt

New Jersey Debt Settlement Attorneys Explain the Collections Process

If you have delinquent income tax debt, the IRS will try to collect the money you owe, just like any other creditor. Depending on your situation, you may face tax liens on your property and/or levies on your wages and bank accounts. However, before IRS collections progress that far, you will receive several notices. If you and your lawyer respond promptly, you may be able to avoid enforcement procedures like this. Even if you are already facing these actions, there are ways to stop the IRS from moving forward with debt collection proceedings.

The debt settlement attorneys at Ast & Schmidt, P.C. understand how hopeless you may feel if you owe back taxes. We have experience negotiating with the IRS and putting an end to IRS collection actions. In a free consultation, we can explain your legal options, which may include taking advantage of IRS debt settlement alternatives. We can also explore debt relief options under the bankruptcy laws, if that is in your best interest.

What is the IRS Collection Process?

Unlike some creditors, the IRS will not harass you for money by telephone – calls demanding payment of tax debt are evidence of a scam! Instead, the IRS will communicate with you by mail for any unpaid taxes. If you do not respond after several notices, the IRS may take steps to enforce payment. In general, the collections process for income tax debt proceeds as follows:

  1. The first notice. Taxes are due on April 15 each year (with some exceptions for weekends and holidays). If you do not pay the full amount you owe by that date, you will receive a bill from the IRS a short while later. This bill will include the amount you owe, plus interest and penalties. If you do not file a tax return at all, the IRS will eventually file a Substitute for Return for you, but you will owe extra fees and penalties.
  2. Additional notices. If you do not respond to the first notice within 30-60 days, the IRS will contact you again. This bill will be higher, since your balance will have accrued more interest and penalties. Then, you will receive one final notice before the IRS moves ahead with collection enforcement actions. This bill will include what you owe, as well as notify you that nonpayment will result in a levy and/or property lien.
  3. Tax lien. The IRS may place a lien on your property to secure payment. In rare cases, the IRS may eventually seize and sell your property to pay your tax debts. This will go on your credit report and hurt your credit score.
  4. Tax levy. Additionally, the IRS may issue a levy against your assets to collect the income tax debt. You may also face wage garnishments and levies on your bank account and/or retirement fund. Usually IRS will not let you receive an income tax refund for subsequent years until the debt is settled.

How Can I Stop IRS Collection Actions?

If you ignore income tax debt notices from the IRS for too long, you may lose your property and have your wages garnished. However, debt settlement attorneys can help you stop these collection actions or possibly avoid them altogether. Some strategies for avoiding or ending IRS collections include:

  • Pay or challenge the bill. Sometimes a mathematical error on your tax return may result in your paying less than you actually owe. In this case, you should pay the balance as soon as possible after you receive the first notice. However, it is possible for the IRS to miscalculate what you owe, too. If that happens, your tax preparer can help you dispute the charges.
  • Request an extension. If you will be able to pay your income tax debt soon, a short extension will give you time to gather your payment. Your tax debt will still accrue interest, but collection actions will not proceed during the extension.
  • Take advantage of an IRS debt management program. The IRS has several programs in place to help people pay their taxes. An installment agreement allows you to pay what you owe slowly over a period of time. An Offer in Compromise (OIC) may allow you to settle your debt for one lump sum payment that is less than the total you owe, but you must file and pay your taxes for the next five years. However, these plans may only work in certain circumstances.

Most importantly, you should never ignore an IRS collections notice. The sooner you take action, the easier it will be to avoid additional penalties and fees as well as avoiding the stress and pressure of continued IRS enforcement procedures.

Learn More in a Free Review with Our New Jersey Debt Settlement Attorneys

Income tax debt is always stressful, but you do have options to avoid or end the IRS collection process. Our Morris County debt settlement attorneys can review your case and find ways to resolve your back tax problems with the IRS. If none of the IRS repayment options are right for your situation, we can explain other options you may have, like Chapter 7 or 13 bankruptcy.

Our lawyers take debt relief clients from throughout New Jersey, including residents of Morris, Sussex, Union and Essex Counties. Contact us online or call our Morristown law office to schedule a free case review.