If you owe back taxes to the US Internal Revenue Service, your case will be assigned to their Collection Division. Collection action can be taken by the Automated Collections Service or by an IRS Revenue Officer. Being the subject of an IRS collection action can be scary and intimidating. In this article, I’ll list a few of their “enforced collection” methods.
The main thing to know is that the chief goal of the IRS is to collect as much of your money they can as quickly as possible. Here are some of the methods they use to do that…
The IRS can levy your bank accounts. According to the IRS, a “levy” is a “legal seizure of your property to satisfy a tax debt.” The IRS may contact your bank and seize your funds after you have refused to pay your back tax debt.
If the IRS levies your bank account, your bank will be required to hold money up to the amount you owe for 21 days. The holding period allows the IRS time to resolve any questions about who owns the account. After that time, your bank is required to send in your money, and any applicable interest, to the IRS.
There are three ways the levy can be released: when the IRS chooses to release it, when you pay your back taxes, or when the time runs out for legal collections. So that’s the basics of an IRS levy.
The IRS can place a levy on your business assets, if you own a business. These assets include accounts receivables, bank accounts, and any business equipment.
The IRS may choose to require your employer to take out part of your paycheck and send it in. Social security and retirement funds can also be garnished by the IRS.
Finally, the IRS can choose to seize any property you may own, including vehicles like cars, trucks, boat or motorcycles.
If the IRS can find any real estate in your name, they may place a lien on it. The IRS flies a “tax lien” at the office of your county recorder, and it will be much more difficult for you to obtain financing or sell the property. The IRS will eventually foreclose if your tax debt goes unpaid long enough.
Although the situation seems dire, these actions can be stopped in their tracks by an enrolled agent or other tax professional who has experience dealing with the IRS. If you owe back taxes and are facing action by the IRS, contact a tax resolution specialist as soon as possible.