Dealing with the IRS can be incredibly stressful, so what happens if the IRS sends you to collections? Here is what you should know.
We all know that the taxman can be frightening. But it’s important to separate fact from fiction.
The IRS is tasked with enforcing tax law and ensuring that taxpayers are held accountable for their tax liability – but it can and does make mistakes and offers plenty of recourse to taxpayers caught in a sticky situation.
Furthermore, taxpayers unable to pay or faced with certain circumstances can negotiate their way out of collection actions entirely – or even fight for a reduced tax liability. But what happens if the IRS sends you to collections?
Understanding What Happens if the IRS Sends You to Collections
If you are sent to IRS collections, there are a few things that will happen. But can the IRS pressure you over the phone? Harass you at your place of business? Send you to jail? Or demand payment through threatening calls and messages? Let’s set the record straight on a few things, and help you better understand your situation:
The IRS Won’t Harass You at Home
There is a code of conduct that the IRS must generally follow, as well as a taxpayer “bill of rights”, which somewhat serves as a guideline for the IRS’s treatment of taxpayers regardless of the situation they are in. Let’s remember that the people working at the IRS are doing a job like any other – and are trying to do it to the best of their abilities.
Some people do impersonate IRS personnel and threaten people over the phone and via emails. These are often IRS tax scammers, either:
- Trying to collect certain information tied to your tax account, such as your social security number or tax identification info to collect tax refunds;
- Or pressure you into making “payments” through gift cards, cryptocurrency, and other suspicious avenues.
If you’ve received legitimately threatening or pressuring calls from someone claiming to work for the IRS, especially if they demanded money or immediate payment via the phone, or asked you to divulge private and identifying information (such as certain account numbers or details), then get in touch with the IRS via official channels (such as their hotline or website) and make a report, and install call blocking software for your smartphone, as well as employing other ways of blocking these scam callers and robocalls on your landline.
The IRS Won’t Demand Information Over Email
If the IRS sends you to collections, they will not reach out and demand information via email. A common scam involves getting people to provide information via fake websites, forms, or edited documents. Note that the IRS will not use email to ask for information. They may notify you of certain things via email but will only ever send official letters and notices of the mail, including any applicable forms.
The IRS will never ask for you to send them your information via email. If at all, they would ask that you sign into your tax account via the official IRS.gov website to review your information and tax notices, including collection notices and outstanding tax debt.
To that end, the IRS will never demand payment via email. The IRS only accepts payments via the official website, and over the Electronic Federal Tax Payment System. Do not attempt to ever send the IRS any money outside of these official channels.
The IRS Won’t Forget Your Debt
If you have a tax debt to the government, and haven’t paid it for years, but haven’t been pressured by any specific collection actions, this may be because the IRS didn’t pursue your account in particular over a rather small debt.
But that debt does not go away, and it continues to accrue interest until it is paid. The IRS can and will pick up the slack at any point in time, which can result in tax liens and tax levies.
The IRS Has to Inform You Via Mail
If the IRS has sent you to collections, any notice or letter the IRS sends your way has to come via physical mail. If the IRS fails to deliver an important notice or letter to you, you can use that to your advantage when arguing for a reduced penalty – especially if you only paid your overdue balance a few days after it was due for a penalty.
However, you are responsible for keeping the IRS up to date on where it should send your mail. Failing to do so can land you in very hot water, and make it impossible for you to appeal a decision to penalize your tax account, even if you didn’t get your hands on the notice you were supposed to receive in time.
The IRS Can Compromise
If the IRS has sent you to collections, your tax debt is not necessarily set in stone. While your tax account can continue to accrue debt, it can also potentially see a reduction in debt.
For one, if you successfully appeal that it was the IRS that made a mistake (it does happen!), you may see your new tax debt wiped out. But if you really do owe back taxes, or made a mistake on your return and have to pay up, the IRS will consider compromising on the amount you pay if you:
- Cannot afford to pay your entire debt within a reasonable period through monthly installment agreements, and
- Send a reasonable offer to the IRS based on what you can afford to pay, given current assets and income.
These offers in compromise are notoriously difficult to get, so it’s always a good idea to approach a tax professional first.
The IRS Does Employ Private Debt Collectors
This might come as a surprise, but the IRS does not do all of its debt collection work via its own agents. Sometimes, it must outsource. However, it outsources to only three specific collection agencies, and these agencies have no right to collect payments themselves.
All they are in charge of doing is establishing contact between you and the IRS’s payment system, and help you resolve your debt. They are not allowed to threaten you, and must also respect the same rules and guidelines for taxpayer interaction as your IRS.
What to Do If the IRS Sends You to Collections
Yes, the IRS does have the tools to pressure you into payment – but you also have certain tools at your disposal. Working with a tax attorney can help you protect yourself from any uncouth action the IRS might take – and help you ensure the best possible deal for your tax debt.
Now that you know what happens if the IRS sends you to collections, remember that one thing is always true: you should deal with your tax problems as soon as possible. We at Rush Tax Resolution can help you put together the right plan to get the IRS off your back and get back on the taxman’s good side.