The IRS is the country’s largest and most powerful collection agency, empowered by Congress to take whatever actions are necessary to collect taxes owed to the federal government. Such broad authority can easily instill fear among those unfamiliar with the IRS’s collection procedures.

What is IRS?

The Internal Revenue Service (IRS) is a federal agency in charge of enforcing and implementing tax laws in the United States. Its responsibilities include collecting taxes from individuals and businesses and managing various tax-related programs and initiatives.

The IRS is in charge of assessing and processing unfiled tax returns, conducting audits and investigations, collecting delinquent taxes, and providing taxpayers with guidance and support. The agency also works to prevent tax fraud and abuse by enforcing compliance with tax laws and regulations.

The IRS is critical to the functioning of the United States government because it ensures that tax revenues are collected fairly and efficiently.

Collection Actions

The Internal Revenue Service (IRS) has several collection actions available to recover delinquent taxes from taxpayers. These actions encourage taxpayers to pay their debts and ensure that tax laws are followed.

 However, before taking enforcement action, the IRS will consider a taxpayer’s ability to pay and may assist taxpayers in resolving their tax debts.

 Here is a more detailed explanation of some of the IRS’s most common collection actions:

1. Levy

Levy refers to a  legal seizure of a taxpayer’s assets, such as wages, bank accounts, and real estate. The IRS can garnish taxpayers’ wages, seize their bank accounts, or seize other assets to satisfy a tax debt. A levy will remain in effect until the tax debt is paid in full or the statutory collection period expires.

2. Seizure

The IRS may seize a taxpayer’s assets, such as a vehicle, boat, or real estate, to satisfy a tax debt. The IRS will first send a Notice of Intent to Seize Property, giving the taxpayer time to pay the debt or make other arrangements.

3. Lien

A lien refers to a  legal claim made by the government on a taxpayer’s property. A lien gives the government first priority property ownership and can be enforced if the taxpayer sells or refinishes it. Tax liens can remain in place for years and harm a taxpayer’s credit score.

4. Offer in Compromise

An Offer in Compromise is a bargain struck between the taxpayer and the IRS to settle a tax debt for lower than the full amount owed. The taxpayer must provide financial information and demonstrate that they cannot pay the debt in full to be regarded for an Offer in Compromise. Offers in Compromise are evaluated individually and are not always accepted.

5. Notice of Intent to Levy

The Notice of Intent to Levy refers to a  written notice sent to a taxpayer by the IRS before levying their assets. The notice allows the taxpayer to pay the debt or make alternative arrangements before their assets are seized.

6. Installment Agreement

An installment agreement is a payment plan that allows a taxpayer to pay off their tax debt over time. The taxpayer can request an installment agreement by submitting a payment plan proposal to the IRS. The proposal must include the taxpayer’s financial information and a repayment plan.

It is critical to understand that the IRS has broad authority to enforce tax laws and collect delinquent taxes, and taxpayers should resolve their tax debts as soon as possible.

Assessment in IRS

Determining the amount of tax owed by a taxpayer is an assessment by the Internal Revenue Service (IRS). The assessment process begins when a taxpayer files a tax return, which the IRS then reviews to determine whether or not the return is accurate and complete.

If the return is accurate and complete, the IRS will calculate the amount of tax owed using the information on the return and the tax laws in effect at the time. If the return needs to be corrected, the IRS will make the necessary adjustments and assess additional tax, interest, and penalties.

When the assessment is finished, the taxpayer will receive a bill for the amount of tax owed, plus any interest and penalties accrued. If the taxpayer accepts the assessment, they can pay the bill in full or establish a payment plan with the IRS. If the taxpayer disagrees with the assessment, they can file an appeal with the IRS or file a tax court petition.

Understanding that the assessment process can be complicated, taxpayers should know their rights and obligations. If a taxpayer needs clarification about the assessment, they should seek the advice of a tax professional.

State and Local Taxes

State and local governments levy taxes to fund various government services and programs. Income taxes, sales, property, and other taxes are examples of state and local taxes.

State and local taxes may significantly impact a taxpayer’s overall tax liability, and taxpayers should be aware of the state and local taxes that apply to them. Taxpayers may seek the advice and assistance of a tax professional to understand and comply with state and local tax laws.

The Bottom Line

Taxation can be a complex equation. However, it does not begin and end with numbers. Don’t get caught up in the date a return was filed; look at the entire process from beginning to end and fill in the blanks as needed. Pose inquiries. And hold crucial discussions. You’ll be happy you did.

And IRS Problems is always here to help you out through its team of professionals.