How The Collection Process Works

If taxpayers fail to pay their taxes in full, the Internal Revenue Service will send them a bill

. The bill starts the collection process.

The collection process will carry on until the individuals pay the rest of their taxes or until the IRS cannot legally collect the tax.

The first thing the IRS sends to someone who has not paid all of their taxes is a notice. The notice will explain how much they owe, as well as the penalties and interest that have been accumulated since the due date of the tax. It will also include information about taxpayer rights and the collection process.

To pay off the rest of their debt, taxpayers may send a check or money order to the IRS made out to the United States Treasury. Consumers are advised to include a copy of the notice as well.

Those who cannot pay their entire debt at once are encouraged to pay as much of their balance as soon as they can. Any balance that is unpaid may be charged interest that is compounded daily, as well as a monthly late payment. Failing to pay off tax debt could poorly affect one's credit rating. Some people may want to consider paying with their credit card or take out a bank loan since those interest rates may be smaller than the combined interest and penalties the IRS applies to late taxes. Visiting a tax preparer is a good option to figure out what plan of action is best to take.

People who think they will not be able to pay off their debt may be able to pay in monthly installments using the Online Payment Agreement. The OPA allows individuals to have money directly taken from their bank account to pay off their tax debt. The fee is usually lower, compared to other installment agreements.

Taxpayers who are not eligible for an installment agreement may request an Offer in Compromise, which is an agreement between the individual and the IRS that can reduce the amount of money owed.

The IRS may stop collection if an individual cannot pay anything at all because they are experiencing a financial crisis.

Service members should look at the Armed Forces' Tax Guide to see if they qualify to defer payment.

It may be difficult for some people to pay off all of their taxes in full, especially during these hard financial times. A tax preparer may be a good option to use to make sure individuals are paying their taxes correctly and on time.

by: Liberty Tax Service

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