If you owe money to the IRS and neglect to pay, they can and will levy bank accounts, wages, accounts receivable, etc., and, if necessary, come to your door. If you do not file tax returns the IRS will send letters requesting that you file the return(s), possibly come to your door, and eventually make an estimated assessment against you.
How long does all this take? After you file a tax return which shows a balance due, you will receive your first Notice from the IRS in about four to six weeks. (Do not ignore any Notice or letter from any tax collection agency and make sure you read them carefully.) Four to six weeks later you will receive the next Notice and it will be a little more assertive than the first. You may receive one or two more Notices, each a little more assertive than the prior Notices. When any Notice is received by Certified Mail, the IRS can file a Federal Tax Lien with the County Recorder after 10 days. (Not picking up a Certified letter from the IRS may only delay the IRS for a short time AND does not prevent the IRS from taking action against you. The IRS will eventually find you!)
A Lien is a public notification of your tax debt. IRC §6321 imposes a lien in favor of the United States on all property and property rights of a taxpayer liable for taxes after a demand for the payment of the taxes has been made and the taxpayer fails to pay those taxes. The lien arises at the time assessment is made and continues until the liability is satisfied or becomes unenforceable by lapse of time. IRC §6322.
A Lien filing is like the recording of a judgment, will be picked up by credit reporting agencies and attaches to any real estate that you own. (A Lien does not attach to your bank account, wages or income.)
Generally, one more Notice will follow that warns you of the IRS’s intention to levy bank accounts, wages or other income. If the levy-warning letter is ignored, you can plan on a levy on wages or other income within 30 to 90 days. IRC §6331(a) authorizes the Commissioner to levy upon all property or property rights of any taxpayer liable for any tax who neglects or refuses to pay that liability within 10 days after notice and demand for payment.
If you do not stay in communication with the IRS to resolve your liability they will begin enforcement by levy and may eventually assign the collection of the liability to a local IRS Revenue Officer. (Revenue Agents are auditors that audit tax returns; Revenue Officers are tax collectors.) It is Revenue Officers who knock on your door to collect taxes. If you have not filed one or more tax returns the IRS will send letters requesting the filing of the tax returns. If you do not file them, the IRS will make an assessment against you and demand payment, and the previously mentioned process begins.
When the IRS pursues collection by lien or levy, he must notify the affected taxpayer in writing of his or her right to a CDP hearing with an impartial Appeals officer. See IRC §6320(a) and (b) (relating to liens), IRC §6330(a) and (b) (relating to levies). Where a hearing is requested, whether in response to an Notice of Filing Tax Lien filing or a proposed levy, the presiding Appeals officer must satisfy the standards set forth in section IRC §6330. See secs. §6320(c), §6330(c).
Here are some Notices and Letters you might have or might receive during this process:
- Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, advising you of recorded liens. This letter will probably also advise you of a collection due process (CDP) hearing.
- Letter 1058, Final Notice of Intent to Levy and Notice of Your Right To a Hearing.
- Form 12153, Request for a Collection Due Process or Equivalent Hearing. This is your request of a hearing. This form permits you to indicate the nature of your CDP hearing by checking boxes selectively.
Collections Due Process Hearing
Specifically, as part of the CDP hearing, the Appeals officer must take into consideration:
- verification that the requirements of applicable law and administrative procedure have been met;
- relevant issues raised by the taxpayer concerning the collection action; and
- whether the proposed collection action balances the need for the efficient collection of tax with the taxpayer’s legitimate concern that the collection action be no more intrusive than necessary. Sec. §6330(c)(3).
Relevant issues may include appropriate spousal defenses, challenges to the appropriateness of the collection actions, and potential collection alternatives such as an installment agreement or an offer-in-compromise. IRC §6330(c)(2)(A).
Collection Due Process hearings are informal and do not require the Appeals officer and the taxpayer to hold a face-to-face meeting. IRC § 301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.
If a taxpayer seeks collection alternatives, the IRS will request taxpayer to complete IRS for 433-A. If the offer-in-compromise box is checked, taxpayer must complete form 656.