Colorado Springs: What Exactly is the IRS Collections Process?

 

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. 

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: Why am I in IRS Collections?

 

Have you failed to pay your tax liability? The IRS will initiate a series of steps to collect the owed amount. Initially, you are sent a series of notices, starting with a CP14, which informs you of the balance due. If you do not respond or make arrangements to pay, the IRS escalates the matter by sending additional notices, such as the CP501 and CP503, which serve as reminders and warnings of potential collection actions.

If you continue to ignore these notices, the IRS may issue a CP504, which is a final notice of intent to levy and a notice of the taxpayer's right to a hearing. This notice indicates that the IRS is preparing to take more aggressive collection actions, such as garnishing wages, levying bank accounts, or seizing property.

In some cases, the IRS may assign the debt to a private collection agency. This typically happens when the IRS has exhausted its internal collection efforts. The private agency will then attempt to collect the debt on behalf of the IRS, although this approach has been criticized for its inefficiency and the undue stress it places on low-income taxpayers.

Throughout this process, it is crucial for you the taxpayer to respond promptly to IRS notices and seek professional assistance if needed to avoid severe financial repercussions.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: Has Your Back Tax Debt Expired?

 

Do you owe taxes from several years ago?  Is the IRS still trying to collect from you?  Are you aware that under the Internal Revenue Code Section 6502 there is a 10 year limit on collections?

This 10 year limit starts on the day when the tax is first assessed, not when your tax return was filed.  There are also several actions that can extend the collection period.

What does this mean for you the taxpayer?  If you are still paying on taxes first assessed over 10 years, your tax debt may be gone and no longer collectable.  With a proper calculation of the collection period Marcelino Dodge, EA can determine if you no longer need to make payments.  Oh, what a relief that would be!

Cash Tracks Financial of Colorado Springs
Marcelino Dodge, EA
525 N Cascade Ave., Suite 200
Colorado Springs, CO 80903
(719) 359-8789
www.cashtracksfinancial.com
success@cashtracksfinancial.com

Colorado Springs: How Can I Deal With Federal Tax Lien?

 

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com