How many of us desire to be contacted by a collection agency? I would say none of us want to be contacted by a collection agency, especially if the collection agency is the Internal Revenue Service. If we failed to file an income tax return and/or failed to pay our income taxes you can count on getting the series requesting payment of your taxes.
Why is it important to still file my tax return, even if I cannot pay the tax? One reason is that you want to start the statute of limitations on your tax return and the payment of your taxes. If you do not file your tax return, then the statute has not started and essentially you give the IRS a longer period of time to collect the taxes due.
Under IRS Code Section 6502, the IRS has ten years from the date of assessment to collect outstanding tax liabilities. This why it is important to file your return and to start the 10 year clock. For example, if you wait three years to file than you just gave the IRS an extra 3 year to collect from you. Under some circumstance this period can be extended. Also, if the IRS does not collect the debt within this 10 year period, the liability is typically no longer enforceable.
The IRS Collection Process begins when a taxpayer fails to pay their tax bill. Initially, the IRS sends a series of notices and demands for payment. If the taxpayer does not respond or set up an installment agreement, the IRS can take more aggressive actions. Some of the options include liens on property, levying bank accounts, or garnishing wages.
Taxpayers have a right to have an Enrolled Agent (EA) represent them though this process. An EA can help the taxpayer to setup an installment agreement, prepare an offer in compromise, or speak to the IRS on the taxpayer's behalf.
Having a tax professional help you during the collection process is vital for you to understand the processes and timelines. An EA will help you to be informed and to mitigate the impact of IRS collection efforts.
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