I received a call today from an enrolled agent for my help with a client who was having problems not only with the IRS, but credit cards as well. As usual, my enrolled agent friend got it right – bankruptcy was likely on the horizon for us to take care of both problems simultaneously.
Two basic rules on owing the IRS and credit cards:
- The credit cards are usually firing blanks but make you believe they have a cannon.
- The IRS, on the other hand, has a cannon.
Like many things in life, how the IRS and credit card companies appear to you bears little resemblance to their reality.
Every month, credit card companies send a statement for payment – along with all of the interest charges. If you do not make the monthly payment, the dunning letters and telephone calls start. Your account is sent out to a debt collector, and the phone rings. Nerve-wracking.
The immediate pressure credit card companies put on you for payment can result in them getting more attention than the IRS. It should be the other way around.
Here is the important part to know: The credit card companies have to file a lawsuit against you in court to be able to take your wages or bank accounts. This not something that they do readily or even all the time.
Remember this: Until you hear from a lawyer who has filed a court action against you, you are under no risk of losing your wages or property from a credit card debt. And most cases simply go the route of debt collectors without court action – attempting to collect by pressure.
The IRS is usually less aggressive than credit cards at the outset. The IRS will send you several collection notices after your tax return is filed, then stop. After that, you may receive mail from them only once a year (an annual statement of your account).
Unless you are on an installment agreement, the IRS does not stay in front of you with monthly statements like the credit cards. And the IRS rarely makes outbound phone calls seeking payment. But the IRS can be a sleeping giant.
Those few collection notices the IRS sends you at the outset of your case can allow the IRS to immediately start levying on your wages and bank accounts. No calls asking for payment, no monthly bills in the mail, no wondering about lawsuits like the credit cards – just a simple letter – the Final Notice of Intent to Levy.
After the IRS letter stream ends, you can get a wage or bank levy without any further notice.
It may seem like the IRS is trailing behind the credit cards, but they are actually ahead of the game, and should be at the head of the line. It can be deceiving. And the stakes are high.
As I have written in prior posts, the IRS can be slowed down by appealing the Final Notice of Intent to Levy. If you are interested in learning about the stream of IRS collection letters, see my post “What do all of these IRS collection letters mean?” For more on how bankruptcy can eliminate or reorganize IRS and credit card problems, read more here about Chapter 7 and Chapter 13.