Almost every other day, there is news about a celebrity or executive accused by the Internal Revenue Service (IRS) of tax evasion. This governmental agency requires that individuals and businesses pay taxes on a “pay-as-you-go” basis. Many people and organizations, however, are not able to meet this stringent rule. This becomes problematic when the IRS sends notices of past due amounts. If unpaid, these notices can result in tax liens on property. When the IRS begins to collect monies owed to them from an individual or business, they usually do so in three steps.
Step #1: Assessment
The first step the IRS takes is to assess amounts owed under a certain social security number or federal tax ID number. They usually complete a thorough assessment to ensure that the monies owed belong to the person or entity in question. They then send a Notice of Delinquency (or Notice of Deficiency or Notice of Assessment) with pertinent information about their findings. These documents state the principal debt, which includes underpayment of taxes, unpaid taxes, untaxed income and improper deductions. Penalties and interest charges are also added because of failure to pay on time or not paying at all.
A tax attorney can help an individual or entity avoid the headaches, stress and frustration that come from receiving a Notice of Delinquency. The lawyer can ask for proof of tax nonpayment from the government agency and, in certain cases, can actually make the principal go away. The penalties and interest can also disappear or be reduced by the agency if the money is not owed.
Step #2: Collections
Once an assessment has been completed and a Notice of Delinquency sent to the delinquent, the IRS then moves to the second step of the collection process: payment request. They do this through the use of an automated collection system (ACS) or revenue agents. In ACS cases, any IRS employee who receives the inquiry will follow up, and an individual or entity will likely work with multiple agents throughout the process.
If the debt is of a certain amount, the case will be moved to a revenue agent. The advantage to this is that only that one person will handle the case going forward. It is recommended that one get a tax attorney, especially at this point, because revenue agents deal with very serious tax cases.
As frustrating as the collections process can become, the debtor should never yell at IRS employees, as this can make their case worse.
Step #3: Liens and Levies
If the debtor does not respond to the notices and the request to pay the debt, then the IRS will use liens and levies to recoup what is owed to them. Tax liens are created 10 days after the first notice is sent to the debtor. The most widely used form of levy is reduction of future tax refunds. They can also garnish wages, seize bank accounts, close down businesses and sell property to the highest bidder. This can hurt a small business and destroy their reputation with their customers.
The IRS tax collection process can become complicated, frustrating and painful. Working with a tax attorney can be extremely beneficial. When one chooses to work with a tax attorney, they can have these notices withdrawn and levies reversed. This professional can help one work with an affordable payment plan or pursue other less-restrictive collection options with the Internal Revenue Service.
Byline: David Burke recommends using RG Brenner when tax season comes along in order to avoid the inherent stress and worry that taxes create.