IRS Collection Process
By Steven A. Leahy
Resolving IRS problems is not easy. When a taxpayer owes the IRS, the IRS will send a bill, a “Notice” in IRS speak – This begins the four step collection process. Additional notices will follow – each directing the taxpayer to pay the outstanding balance, or set up a “payment solution.”
The initial notice (IRS Form CP 501) is generated by one of ten Regional Compliance Centers. IRS Form CP 501 is a reminder telling the taxpayer that there is a balance due on a tax account. Five weeks after the first notice, the compliance center will generate IRS Form CP 503, “Second Notice: You have unpaid taxes for 20xx.” IRS Form CP 503 uses a more urgent tone. Five weeks after IRS Form CP 503, the compliance center will generate IRS Form CP 504 “Notice of Intent to Levy: Intent to seize your property or rights to property Amount due immediately: $XX,XXX.XX.” Now, the IRS is taking things from you.
If the taxpayer does not respond to these notices, the account becomes delinquent. Delinquent accounts are assigned to the Automated Collection System (ACS) or the Collection Field function (CFf). Most accounts go to the ACS for collection efforts. Some accounts, however, go directly to CFf and are assigned to a Revenue Officer.
If the delinquent account is assigned to ACS, ACS employees will contact the taxpayer by telephone and try to work out a payment solution. The taxpayer may also call ACS to work out a payment solution. ACS maintains a computerized inventory system that has taxpayer information, including personal information (name, address, telephone number, date of birth, adjusted gross income and social security number), audit information, IRS collection information, and perhaps the taxpayer’s credit report and bank account information. ACS uses this information to assist them in their telephone collection efforts and enforced collection efforts. Enforced collection authorizes ACS to collect delinquent accounts via bank account levies, wage garnishments and levies on accounts held by other third parties (e.g. accounts receivables). Often delinquent accounts are forwarded on by ACS to CFf.
When an account reaches CFf, a Revenue Officer (RO) is assigned. The RO will be directly responsible for collecting the balance on the delinquent account. A RO may call the taxpayer, or even appear at their home or place of business. Being on the receiving end of a RO visit is never a good experience. Once a RO is assigned – that person is your contact person within the IRS. The RO can also direct enforced collection efforts – bank account levies, wage garnishments and levies on accounts held by other third parties (e.g. accounts receivables).
If a taxpayer disagrees with a decision by the IRS Collections office, there is an appeal process. Appeals are conducted by the IRS Office of Appeals – a separate and independent office. There are two main appeals procedures, Collection Due Process (CDP) and Collection Appeals Program (CAP). A CDP or CAP will often get a better result than dealing with ACS or a RO – but not always.
Before the IRS can levy your assets they must send the taxpayer IRS Letter 1058 “Final Notice – Notice of Intent To Levy And Notice of Your Right to A Hearing.” Use this last opportunity to resolve your IRS Problem. Generally, IRS Letter 1058 is sent via certified or registered mail. So, if you are experiencing IRS problems and you receive notice of a certified letter, GO TO THE POST OFFICE AND PICK IT UP.
If you are facing IRS Collection Efforts, you should work with a local law firm that understands the IRS Collection procedures and will work to get you the best deal possible. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.