Now that you have filed your tax returns and have discovered that you owe the IRS, how do they collect the money? First the IRS will send you a bill with the tax owed based on your return and with any applicable penalties and interest. If you don’t pay the first bill, the IRS will send you a second bill. If you agree with the amount there are several ways to pay: mail in a check with your voucher. These days, this is my least recommended way to pay because of the IRS mail back log. You can visit www.irs/gov/payments to consider online payment options. You can also create your own online account with the IRS and pay that way. This online portal can also allow you to see you past year tax returns and make estimated payments as well. Another way to pay is to set it up with us (if I am your tax preparer) or your current tax preparer to do direct debit of the tax owed when they submit your tax return. So, if you still do not pay after they send you your final bill, the IRS will start with collection action. The IRS has 10 years from the tax assessment date to collect the tax owed. That is a long time for you to be on the IRS’s radar.
Here are some of the collection terms that are used within the IRS:
Federal Tax Lien: A legal claim against all your current and future property. This lien automatically comes into existence when you don’t pay the tax on time after the first bill.
Notice of Federal Tax Lien: This is when the IRS sends out a notice to all creditors notifying them that you own the IRS.
Notice of Intent to Levy: They send you a notice with the intent to Levy. If you don’t pay by the time given on this notice, they will start the Levy process.
Levy: They take the money from your bank accounts. This is a legal seizure of property and rights to property. They can also seize your assets and sell them.
Seizure: Same as a levy
Next month, I’ll explain some of the types of notices.
Also, look for my Facebook post with a downloadable PDF on “21 Ways to Get Help for Your IRS Tax Problem and Get Your IRS Debt Resolved, Reduced, or Forgiven.”
Ancient taxes from around the world
In 1705, Russian Emperor Peter the great placed a tax on beards, hoping to force men to adopt the clean-shaven look that was common in Western Europe.
The French had a salt tax called the gabelle, which angered many and was one of the contributing factors to the French Revolution. It was adopted in the 14th century and had many revisions, lapses and reinstatements and finally abolished in 1946!!