Your case goes to the Internal Revenue Services "Collection" department whenever the IRS determines that you owe back taxes. This will happen if you file a tax return and don't pay the tax owed, or if the Internal Revenue Service wins at an audit of the tax return you filed. They have many tools to collect the tax.
Once your case is in Collection, you will receive notices asking for payment of the tax. If that does not bring about payment, then the IRS automated system will begin seizing assets they know exist (such as your bank accounts).
If the amount you owe is high enough, an IRS Revenue Officer will be assigned to your case. The officer will call you and will either ask you to come in to an IRS office or come out to see you personally.
Should I use a tax professional in dealing with IRS collection efforts?
A "tax professional" is a person with special training in dealing with tax issues and representing taxpayers before the IRS. Usually, these people are lawyers or certified public accountants.
Often, a tax professional can save you a lot of money. The expert is familiar with tax problems and with the ways to deal with the IRS. You can spend many hours trying to find an answer that an expert already knows. Also, many people simply find it too stressful to deal with the Internal Revenue Service and would rather have someone speak for them.
The tax professional will cost you some money in fees. If your tax problem is small and if you don't mind dealing directly with the IRS, you can probably handle your own case. But if your case is complex or technical, you are probably best off seeking help.
I don't think I owe the tax. Can I fight collection on this basis?
During an audit, you may dispute an IRS claim that you owe more taxes. But generally you cannot do this as a way of fighting collection. You must pay the tax and then file a claim for refund.
There are a few special situations where you can dispute an IRS claim that you owe more taxes. If you think you don't owe the tax, you might want to talk to a tax expert about your situation.
Is there a limit on how long the IRS can try to collect?
Yes. In most cases, the IRS has ten years (the "statute of limitations") to collect back taxes - from the time they "assess" the taxes. Assessment is the point where the IRS stops saying, "We think you might owe some taxes," and says simply, "you owe the taxes." This happens if you file your tax return but don't pay all the taxes or if the IRS has been successful in an audit.
In most cases, waiting out the ten years will not work. However, if for some reason, eight or nine years have passed since the taxes were assessed, waiting out the rest of the ten years could work. Be careful to count the years properly. There are a number of processes that will extend the ten years. For instance, a bankruptcy or filing an Offer in Compromise will extend the ten years.
The IRS collection demand is the first time they said I owe anything.
Sometimes the Internal Revenue Service makes a mistake, but usually one of two things has happened.
Often the taxpayer has moved and not told the IRS his or her new address. If the IRS sends notices to the last known address, it has satisfied the law.
The other thing that happens is that the IRS sends letters, but they are either ignored or thrown away.
When either of these things happens, the whole audit is completed without the taxpayer even knowing about it. Then when it goes to Collection, the Internal Revenue Service sometimes finds the taxpayer - who is now in for a big surprise. GotTrouble.com