The Stages of IRS Action Against a Taxpayer

  • Robert S. Thomas,
  •   Taxation
  •   Comments Off on The Stages of IRS Action Against a Taxpayer

Problems with the IRS can be daunting to think about. They are a massive government agency that has a Federal mandate to collect money they believe you owe, with the legal tools and resources to follow through. However, if you are in a tax dispute or dilemma with the IRS, don’t lose hope. An experienced tax attorney can provide you with your best available options to resolve your situation and to make sure that the IRS takes your legal rights seriously. Hopefully, you do not run into such trouble, but if you do, the following information will help you understand what it looks like when the IRS takes action against a taxpayer.

The IRS Determines You Owe Money

Following the filing of your tax return, the IRS may determine that your return should be adjusted and that you owe more money. If this happens, you will receive an initial Notice of Balance, which will reflect your adjusted tax obligation. You may choose to pay or appeal your adjustment. However, if you ignore the notice, you will receive additional notices about every four weeks.

These notices will contain your new balance, as the IRS can charge compound daily interest and a monthly penalty on your tax obligation. You will eventually receive a final bill, which is your last opportunity to respond before collection actions begin.

Settlement Options

If you cannot pay your adjusted tax obligation, there are several methods of settling with the IRS. The first is an installation agreement, in which you can seek monthly payments. The IRS must approve this agreement and you are still liable for interest and penalties until the balance is paid off.

Another option is an “Offer in Compromise” (OIC), in which the IRS agrees to accept less than what you owe. While this may sound great, it comes with big caveats. One of the biggest is that in order to demonstrate that you are unable to afford your tax obligation, you have to provide the IRS with a roadmap to all of your assets. This may provide fruitless as the IRS may then decline your offer and place a lien on property you just brought to their attention.

IRS Collection Tools

The IRS has a ten year time period to collect delinquent taxes. Afterward, collection is barred by the statute of limitations. There are numerous federally authorized tools which the IRS uses to collect from a taxpayer. This includes:

Issuing a federal tax lien. This is one of the IRS’ most potent tools in that it puts a government claim on ALL of your property. In addition, the IRS creates a notice of lien that all major credit reporting agencies become aware of. This effectively eliminates your ability to borrow money and can even prevent you from obtaining employment.

Seizing your property. Referred to as a “levy”, the IRS can seize your property to settle your unpaid tax debt. This can include property such as your home, your bank account, or even your pension.

Summons. This is essentially the IRS’ version of a subpoena, in which you are obligated to personally appear to testify or provide records regarding your tax obligation.

If you have received a tax bill significantly higher than you calculated, you need a tax attorney on your side. The IRS has tremendous resources to collect what they believe you owe. A tough, experienced tax attorney can help you even the odds. I have been a tax attorney for over twenty years, have a Master of Law Degree (LLM) in Taxation, and am licensed to practice in the United States Tax Court. I can help you through any tax issue. Contact The Law Offices of Robert S. Thomas at 847-392-5893 for a consultation or visit our website today.

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