Are you getting letters from the IRS about tax debt? You’re among the millions of Americans who collectively owe more than $114 billion to the IRS.
There may be a simple error on a tax return or you’re not able to pay the tax bill. It’s frightening because you know the IRS has a lot of power and they can take your home and bank accounts.
When you understand how IRS debt collection works, you’ll feel more at ease about handling back taxes. This is a topic that’s too important to ignore.
What should you do about an IRS tax debt? Read on to learn about the IRS collection process and how to handle your tax bill.
The IRS Debt Collection Process
There are a lot of scams and people who call claiming that they’re with the IRS. The IRS collections process never involves phone calls.
You get letters in the mail with the amount owed and the due date. Each letter has a code. The letters escalate in urgency if they go unanswered.
For example, the IRS might start out with CP14, which is a notice of unpaid taxes. This gets sent several times.
Eventually, you’ll get certified letters from the IRS that threaten action against you. You’ll then get a notice that the IRS will levy your bank accounts or put a lien on your property.
Congress recently passed a law to require the IRS to turn late accounts over to debt collection agencies. You’ll have to deal with a private collections company if your taxes go unpaid.
How to Deal With Unpaid Taxes
There are dozens of reasons why taxes go unpaid. You may not have realized that you need to file taxes. This is common for newly self-employed people who have unfiled tax returns because they thought they didn’t earn enough to file.
There are a few ways to deal with unpaid taxes. The first thing to do is to figure out how much you owe and how much you can pay right now.
The next step is to contact the IRS. You may want to hire a tax consultant to work with the IRS on your behalf.
Moreover, you can make a payment on taxes now with the funds you have available and then pay the rest in installments.
You may try an installment plan where you pay the tax bill in monthly installment payments until the debt is paid.
The final option is to enter an offer-in-compromise. This is where you can pay less than the amount owed. Be aware that the IRS doesn’t approve these plans often, so you’ll want to hire an expert to help you through the process.
Understanding IRS Debt Collection
An unpaid tax bill causes stress and anxiety. Knowing how IRS debt collection works should put you at ease because you can put a plan of action in place.
The main thing to do is to get help or call the IRS yourself to make payment arrangements.
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