The Collection Process

If you do not pay in full when you file your tax return, you will receive a bill. This bill starts the collection process, which continues until your account is satisfied or until the IRS may no longer legally collect the tax; for example, when the collection period has expired.

The first notice you receive will be a letter that explains the balance due and demands payment in full. It will include the amount of the tax plus any penalties and interest added to your unpaid balance from the date the tax was due. You may pay the amount due by sending the IRS a check or money order, payable to the United States Treasury, with a copy of the notice. You may also pay by credit card by calling 888-872-9829, 888-729-1040, or 888-972-9829, or by debit card, by calling 866-472-9829. A convenience fee paid to the service provider, not the IRS, will be charged for payment by credit card or debit card.

If you cannot pay in full, you should send in as much as you can with the notice. Refer to Tax Topic 202, Tax Payment Options, for alternatives available for paying. The unpaid balance is subject to interest compounded daily and a monthly late payment penalty. It is in your best interest to pay your tax liability in full as soon as you can to minimize additional charges. You also may want to consider obtaining a cash advance on your credit card or a bank loan. The interest rate and any applicable fees your credit card company or bank charges may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. Paying off your tax debt by using a credit card or obtaining a cash advance or a bank loan also may keep your tax debt from negatively affecting your credit rating.

If you are unable to pay anything because of financial hardship, we may temporarily suspend certain collection action, such as issuing a levy, until your financial condition improves. The IRS may, however, file a Notice of Federal Tax Lien while your account is suspended. Please call the phone number listed on your bill to discuss this option. Interest and late payment penalties will continue to accrue while you make installment payments or while collection is suspended. If you are a member of the Armed Forces, you may be able to defer payment. See Publication 3, Armed Forces' Tax Guide, which may be obtained on our web site, at www.irs.gov.

If you are unable to immediately pay your balance in full, we may be able to offer you a monthly installment agreement. To request an installment agreement, use the Online Payment Agreement (OPA) or complete and mail with your bill an Installment Agreement Request, Form 9465. Complete lines 11a and 11b of Form 9465 to have the payment directly debited from your bank account. Direct debit installment agreements require a lower fee than other installment agreements and help you avoid default of the agreement by making timely payments automatically. Some installment agreements can be established over the telephone. Refer to Tax Topic 202, Tax Payment Options, for more information.

If you do not qualify for an installment agreement under any of the payment options, you may propose an Offer in Compromise (OIC). An OIC is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability by payment of a reduced amount. Refer to Tax Topic 204, Offers in Compromise, for additional information.

It is important to contact us and make arrangements to pay the tax due voluntarily. If you do not contact us, we may take action to collect the liability.

Some of the actions we may take to collect taxes include:

1. Filing a Notice of Federal Tax Lien
2. Serving a Notice of Levy, or
3. Offsetting a refund to which you are entitled

The federal tax lien is a legal claim to your property, including property that you acquire after the lien arises. The federal tax lien arises automatically when you fail to pay the taxes you owe within ten days after we send our first notice of taxes owed and demand for payment. The government also may file a Notice of Federal Tax Lien in the public records. The Notice of Federal Tax Lien publicly notifies your creditors that the IRS has a claim against all your property, including property acquired after the Notice of Federal Tax Lien is filed . The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating. Once a lien arises, the IRS generally cannot release the lien until the taxes, penalties, interest, and recording fees are paid in full or until the IRS may no longer legally collect the tax.

The IRS will withdraw a Notice of Federal Tax Lien if the Notice was filed while the bankruptcy automatic stay was in effect. The IRS may withdraw a Notice of Federal Tax Lien if the IRS determines that (1) the Notice was filed too soon or not according to IRS procedures; (2) you enter into an installment agreement to satisfy the liability unless the installment agreement provides otherwise; (3) withdrawal will allow you to pay your taxes more quickly; or (4) withdrawal is in your best interest, as determined by the National Taxpayer Advocate, and the best interest of the government.

The IRS also may use a levy to collect taxes. The IRS may levy assets such as wages, bank accounts, Social Security benefits, and retirement income. The IRS also may seize property for the purpose of selling the property to satisfy a tax debt. Such property may include your car, boat, or real estate. In addition, we will apply future federal tax refunds that you are due, to offset the amount you owe. Any state income tax refunds you are owed also may be applied to your federal tax liability.

You may call the IRS at 800-829-1040 to discuss any IRS bill. Please have the bill and your records at hand when you call.

You have rights and protections throughout the collection process. Please refer to Publication 1, which provides additional information on Your Rights as a Taxpayer. More information on the collection process and your rights is available in Publication 594, The IRS Collection Process, and in Publication 1660, Collection Appeal Rights. These may be obtained by accessing the IRS web site at www.irs.gov.