Generally speaking, owing the IRS can become a nightmare many tax payers can never seem to get control of. Most Americans owing money to the IRS are unsure of the rules and strategies on how to permanently solve their issues with the IRS. There are some simple steps a tax payer can take to avoid serious collections as well as prevent future tax problems.
Most Important Fact About IRS
The first and most important fact to know about the IRS and collections is that it is not illegal to owe the IRS money, but it is illegal not to file your tax returns. So, if a client comes to Defense Tax Partners with missing tax returns our first step is to get them completed to avoid jail time.
We have CPA’s, tax practitioners and tax preparers focusing on each and every return filed for our clients to ensure we get every last deduction possible, saving our clients millions of dollars annually. Once tax returns are completed and filed with the IRS we can start to tackle the amount the tax payer owes the IRS and help reduce your taxes.
3-Step IRS Collections
The IRS initiates their collections in a three step process.
– First, you will receive a bill based upon the tax returns you filed which will show the amount you owe plus penalties and interest.
– If you fail to pay your first bill you will receive another bill reminding of the amount owed and outlining the penalties and accruing interest.
– Finally, if you do not pay by the final and third notice, the IRS initiates their collection process.
There are two major types of collection actions the IRS will use to obtain payment; federal tax lien and a levy .
Federal Tax Lien
A federal tax lien is a legal claim against your current and future assets. If a federal lien is placed on you the IRS has claim to your property, homes or cars, wages and bank accounts. Once a lien is filed it is reported to the credit bureaus ruining your credit score.
The second type of collection tactic is a levy, which is a legal seizure of your property, wages and bank accounts to pay your tax debt. Yes, that is correct, the IRS can take your wages and drain your bank account if you choose not to pay them.
So in short, first the IRS will file a lien against you to stake claim to your assets, income and money, and then they will seize your assets, income and money.
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The IRS is the largest, most aggressive collection agency in the world. The IRS has the tools and the man power to take control of your life, personally and professionally. It is imperative that you face the IRS with solid legal representation and take care of your debt so you can avoid the stress, embarrassment and long term negative effects of the IRS collection practices.