Understanding IRS Debt Collection Actions

Posted on March 7, 2022

Understanding IRS Debt Collection Actions

The IRS is known for its aggressive collection of tax debt if taxpayers avoid paying their back taxes after repeated reminders. The two most common methods of collection the IRS uses are a tax lien and a tax levy.

A tax lien on its own is not a collection action; however a tax lien places a right to levy on a taxpayer’s assets, including the seizure of property, which is a collection action. Most taxpayers begin to pay their tax debt after a lien has been placed, but for those that do not, the IRS will move to a levy to fulfil the tax debt.

IRS Debt & Lien Removal

Once the IRS places a lien it affects a taxpayer’s credit report. A tax lien lowers a credit score, along with making it difficult to apply for lines of credit and loans, or buy a home or car.

After a lien has been placed, taxpayers should hire a tax attorney to represent them before the IRS. The only way to get a lien released is to resolve the tax debt issue through one of the IRS’ debt programs. A tax attorney may be able to have the lien removed before the tax debt has been paid to the IRS.

After a lien has been removed, the tax attorney can also attempt to wipe it from the credit report. If the lien isn’t removed, it will stay on the taxpayer’s credit report for seven years.

IRS Debt & Tax Levy

Not responding to a tax lien encourages the IRS to place tax levy on any type of assets a taxpayer may have, including wages, retirement accounts, rental income, accounts receivables, dividends, bank accounts and commissions. The IRS will not notify a taxpayer when they will levy their assets. The only warning a taxpayer will receive is a Final Notice of Intent to Levy and Notice of Your Right to a Hearing letter.

After that notice, taxpayers will have 21 days to communicate with the IRS to stop a levy.

Preventing IRS Debt Collection

Getting a lien and/or levy removed is difficult. Therefore, it is advisable to reply to IRS notices to qualify for an IRS debt payment plan. Paying off an IRS debt soon will help taxpayers avoid the interest that is added every month until the entire debt is paid.

Preventing collection actions saves taxpayers from damaging their credit, a seizure and/or sale of their property, and unnecessary worry. It is in the interest of taxpayers to resolve their IRS debt when they discover it, even if they cannot pay it entirely.