Tax Preparation Help  
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, 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 information

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:

  1. Filing a Notice of Federal Tax Lien,
  2. Serving a Notice of Levy; or
  3. 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 tax.

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 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 (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

Page Last Reviewed or Updated: December 22, 2008

Previous | Index | Next


You can search for information in the entire Tax Prep Help section, or in the entire site. For a more focused search, put your search word(s) in quotes.

Tax Topic Categories | FAQ Categories | Tax Prep Help Main | Home