|Tax Topic #201
||2008 Tax Year
Topic 201 - The Collection Process
If you do not pay in full when you file, you will receive a bill. This
bill begins the collection process, which continues until your account is
satisfied or until the IRS may no longer legally collect the tax, for example
if the collection period has expired.
The first notice you receive will be a bill explaining the balance due
and requiring payment in full. It will include the tax plus penalties and
interest added to your unpaid balance from the date the tax was due. You can
pay by sending the IRS a check or money order, payable to United States Treasury,
with a copy of the notice. You may also pay by credit card, by calling 800–272–9829
or 888–729–1040. A convenience fee paid to a service provider,
not the IRS, will be charged for payment by credit card.
If you cannot pay in full, you should send in as much as you can with the
notice. Refer to 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 might want to consider a obtaining a cash advance on your credit
card or a bank loan. The interest rate your credit card or bank charges and
any applicable fees 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, obtaining a cash advance or a bank loan may also keep your tax
debt from negatively affecting your credit rating.
If you are unable to pay your balance in full, we may be able to offer
you a monthly installment agreement. You can use the Online
Payment Agreement (OPA) or you can complete and mail an Installment
Agreement Request, Form 9465 (PDF), with your
bill. Please attach a voided check to your request to have your payment deducted
from your bank account each month. Direct debit installment agreements provide
you with the ability to make timely payments automatically and reduce the
possibility of your defaulting the agreement. Some installment agreements
can be established over the telephone. Refer to Topic 202, Tax
Payment Options, for more information. If you are experiencing a financial
hardship and are unable to pay anything, we may temporarily suspend collection
action. 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., for more information.
Once all payment options have been considered and it is determined that
you do not qualify for an installment agreement, you may choose to propose
an Offer in Compromise (OIC). It is an agreement between a taxpayer and the
IRS that resolves the taxpayer's tax liability by payment of a reduced amount.
Refer to Topic 204, Offer in Compromise, for additional
It is important to contact us and make arrangements to pay the tax due
voluntarily. If you do not we may take action to secure payment.
Some of the actions we may take to collect taxes include:
- Filing a Notice of Federal Tax Lien,
- Serving a Notice of Levy; or
- Offsetting a refund to which you are entitled.
An explanation of this process is as follows:
The federal tax lien is a claim against your property, including property
that you acquire after the lien arises. The lien arises when you fail to pay
the taxes you owe within 10 days after we send our first bill. By filing a
Notice of Federal Tax Lien, the government establishes its interest in your
property as a creditor in competition with other creditors in certain situations,
such as bankruptcy proceedings or sales of real estate. 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 issue a "Certificate
of Release of Federal Tax Lien" until the taxes, penalties, interest, and
recording fees are paid in full or the IRS may no longer legally collect the
A Notice of Levy is another method the IRS may use to collect taxes. Levying
means that we can confiscate and sell property to satisfy a tax debt. This
property could include your car, boat, or real estate. The IRS may also levy
assets such as your wages, bank accounts, Social Security benefits, and retirement
income. 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
may also be applied to your liability.
You can call the IRS at 800–829–1040 to discuss any IRS bill
you disagree with. Please have the bill and your records at hand when you
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 (PDF), What You Should
Know About The IRS Collection Process, and in Publication 1660 (PDF), Collection Appeals Rights. These may be obtained
by accessing the IRS web site at www.irs.gov.
Page Last Reviewed or Updated: December 22, 2008
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