You don’t want to play chicken with the Internal Revenue Service.
Tax season is over, and the vast majority of taxpayers have filed their returns and paid any outstanding taxes they owed. But for a significant number of people, paying taxes is a hardship that competes with other financial priorities. As a result, it’s not uncommon for taxpayers not to be able to pay everything they owe.
Once you fail to pay your taxes in full, the IRS has a process it goes through in order to collect. Unlike most creditors, the tax service has some special tools at its disposal that give it more power to collect on tax debts. Here, we’ll walk through the collection process and what to expect if you haven’t you’re your taxes.
Starting the clock
The first step in the IRS collection process is an initial bill that the tax agency will send to you. On it, you’ll see the balance due and a demand for full payment. It will include not only the original tax bill but also any penalties and interest accumulated through a specified date.
If you don’t respond to the letter containing the initial tax bill, then the IRS will move on to more dramatic collection actions. Federal tax liens typically apply shortly after the initial demand for payment is made, and sometimes, the IRS will file the federal tax lien in public records to alert other creditors of the unpaid taxes.
The IRS can also take action to seize assets…