Tax Debt Collection
How the IRS Collects

Tax debt collection by the United States Internal Revenue Service, or IRS, is not a process you want to be part of. The IRS has numerous methods and techniques for collecting tax money from those who owe it and they don't forget over time.

If you owe money to the government in taxes your best bet is to pay the bill. If you get behind and owe back taxes or, worse yet, refuse to pay, you can bank on the fact the IRS will employ methods to get the money owed, with or without your cooperation. Now granted, the IRS is a government agency so they don’t move quickly but they do move with conviction.

There is some good news in all this. The IRS recently ended the past practice of outsourcing the collection of tax debt to private firms. Some of these firms employed very aggressive tactics in the pursuit of overdue tax bills.

Now that the IRS is handling debt collection themselves, you will be able to can deal with one official agency that follows certain rules and procedures when collecting taxes. This should offer an easier solution for those who feel they are being unfairly pursued for a tax debt.

How IRS Tax Collection Works

IRS employees working to collect tax debt from individuals are bound by certain laws that govern the behavior of debt collectors. That means they are required to validate the debt in question, if you request it, and must follow limits in the how and when they contact you regarding your tax debt.

The switch from private debt collectors to in-house IRS tax debt collection means changes in how the process works have taken place. Some of these changes may benefit the individual who owes taxes and others may not. Here is a short list of things you can expect from an IRS tax debt collection process.

• An IRS employee tax collector can set up or extend an installment payment plan.
• An IRS employee has the power, under certain circumstances, to forgive some of the tax debt.
• IRS employees follow standard procedures and do not use illegal tactics to collect debt.
• The IRS tends to be more efficient in tax collection than some private collection agencies.

When You Don’t Cooperate

Some people try to procrastinate on paying their tax debts as long as possible, usually with the hope that the debt will eventually expire. For the most part, this is wishful thinking. There is a statute of limitations which puts a 10-year time frame on the collection of a debt by the federal government. However, some states have no such limitation. One should also keep in mind that any fraud or intent to evade paying taxes may not be covered by a statute of limitations.

The IRS has an impressive arsenal of weapons for collecting taxes from those who are unwilling to pay voluntarily. One of the more crippling of these is wage garnishment. This is where the IRS seizes a portion of your paycheck directly from your employer, before you even see the money. The IRS can also freeze or seize cash funds or property in an effort to collect back taxes from those not willing to pay on their own.

Dealing with Collectors

Of course, the best policy when it comes to dealing with the IRS is cooperation. Even if you elect to dispute a tax debt, you should aim to follow the procedures laid down by the IRS for this type of activity. Simply not paying your tax bill will not work.

The IRS Will Negotiate

Recent news accounts have shown the IRS will negotiate a tax bill even when suspected tax avoidance has taken place. Reference the latest cases of investors stashing large sums of money in foreign banks in an effort to avoid payment of U.S. income taxes on the gains. Once this story broke and the government in question released names of U.S. account holders the IRS negotiated tax payments that seemed to let off these scofflaws with nothing more than a small tax bill. No one as of this writing has done jail time.