IRS Collection Efforts

A tax collector’s power is unparalleled. In a matter of minutes, they can walk into your bank and take all of your money. Your wages and salary can also be stolen if your employer is told not to pay you by the IRS. You can also have your car, home, or business seized. Taxes can be collected from you by the IRS in three different ways. These methods are through Bank Levies, Seizure of Assets, and Wage Levies.

Tax Collection Activity by the IRS: What Could Go Wrong?

IRS can usually collect from taxpayers within a 10-year statute of limitations. Taxpayers may find the IRS’s collection efforts considerably more challenging once the IRS begins the collection process.

Retaining future refunds for application against past-due tax debt is one potentially harmful, but commonly used, tool of the IRS. Tax refunds provide budget relief to low- and moderate-income families, as well as the ability for them to purchase items that they would not otherwise be able to afford, such as appliances, vehicles, electronics, and clothing. Consequently, not receiving refunds can cause stress and worry for taxpayers who cannot make these purchases. Particularly when, as is the case with the Earned Income Tax Credit or the Additional Child Tax Credit, the IRS keeps refundable credits to help families out of poverty. When applied to past debts, these credit cards fail to meet their objectives, and the family must turn them down.

Taxpayers who owe more than $10,000 may be served with a Notice of Federal Tax Lien (NFTL), a remedy normally reserved for those who owe more than $10,000. The NFTL impedes the transfer of title to real estate and other assets without first satisfying the tax debt or obtaining a withdrawal. As of April 2018, Equifax, Transunion, and Experian do not list NFTLs in taxpayers’ credit reports (Equifax, Transunion, and Experian no longer do so). Hence, credit scores are not affected by NFTLs. In addition to levying taxpayers’ wages, the IRS may also levy their bank accounts and Social Security benefits. The maximum Social Security levy is generally 15% of the total benefit. Additionally, real estate, vehicles, and retirement accounts may also be seized by the IRS in rare cases.

The IRS was authorized by Congress in 2015 to send notifications to the State Department for seriously delinquent debts of more than $50,000 (including penalties, interest, and an annual inflation adjustment). When we define a debt as “seriously delinquent,” we mean that 1) it has been notified under section 6323 and 2) all administrative remedies under section 6320 have been exhausted or a levy has been filed under section 6331. Deferred due process hearings are not considered serious delinquent debts, nor is section 6015 innocent spouse relief when a due process hearing is pending or underway. Passports can be revoked by the State Department until the debt is paid and the certification is reversed.

To learn more about how they can do this and what you can do if you are facing any of these collection efforts, read on.

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What is an IRS NFTL?

The Notice of Federal Tax Lien (NFTL), referred to in IRC section 6323, is a public notice submitted to specified states and local governments. A NFTL is filed in order to notify the public that underlying tax liens are claiming property of the taxpayer to secure their debt. Additionally, it establishes the priority and creditor position of the federal government in relation to other creditors, as described in IRC 6323, usually purchasers, holders of a security interest, mechanics’ lienors, or judgment lien creditors.

How does the IRS notify you of a tax lien?

In order to notify your creditors of your tax debt, the IRS may file a Notice of Federal Tax Lien. Tax liens are legal claims against property, including property acquired after a lien has been imposed. If you fail to pay the IRS the full amount of a tax debt assessed against you, a federal tax lien is automatically raised. You may not be able to get credit after filing a Notice of Federal Tax Lien. A lien can generally not be released by the IRS until the tax, penalty, interest, and recording fees have been paid in full or until the IRS can no longer legally collect the tax.

How can I stop the IRS collection process?

If you disagree with the information on your IRS bill, call (206) 970-4-IRS to speak to Seattle’s IRS Trouble Solvers. Provide us with a copy of the bill along with any tax returns, cancelled checks, or any other records that will help us understand the issue. Your case will be fought, and if the IRS agrees with you, you will receive a revised bill and your account can be adjusted. IRS may take collection action against you if you fail to pay or dispute the amount owed. Please contact our team immediately if you are in bankruptcy. On your behalf, we will contact the IRS to ensure you are not overpaying. While your tax debt may not be eliminated by bankruptcy, collection may be temporarily stopped. Call (206) 970-4-IRS. You will need the following information: court location, bankruptcy date, chapter number, and bankruptcy number.