IRS Law Blog

A common fear is that an IRS agent may show up one day at your door, take your house, your wages, and your property.

But if the IRS wants to get your attention on a tax debt, chances are you can expect to find an aggressive collection letter in your mailbox rather than find them at your front door.

The IRS only has a few local collection agents, with most enforcement staffing located at several call centers, known as the IRS Automated Collection System.

As the IRS has more computer resources than local agents (known as Revenue Officers), they assign most cases to call centers.  Only files deemed to be of urgency or significance are assigned to local Revenue Officers.

The IRS call centers are not going to place a personal call to you. There is not enough IRS staffing at the call centers to, well, make calls.  Instead, the IRS call centers take calls, and those calls are expected to come from you.

The IRS tries to get you to contact their call centers by sending computer-generated letters to you, ranging from simple billing letters to written threats to take your wages and accounts.  These letters are not generated by human beings, but rather by a computer algorithm which decides and programs for the IRS when the collection letters should be sent.

The computer-generated letters are usually sequenced, first starting “soft” with an initial balance due statement, and then continuing with increasing intensity, leading to a Final Notice of Intent to Levy.

The goal of the letters is for you to pick up the phone and call the IRS Automated Collection System call center.

Should you take the bait and contact the IRS Automated Collection System after receiving a letter from their computer?

Here are the steps to take to protect yourself before picking up the phone and calling the IRS:

1.     Know the limitations on what the Automated Collection System computer cannot do.

For example, an IRS computer cannot take:

• Your house.
• Your car.
• Personal belongings and household goods.
• Business tools, supplies, and equipment.
• 401k retirement accounts.

These seizures tend to be more complicated, and serious, and require the involvement of a local Revenue Officer.  And the IRS computer likely does not know what car you drive, the value of your house, how much you owe on your mortgage, or the details of your business.

If the IRS computer cannot take it, consideration should be given to if it is necessary to call and protect it.

2.     Understand how the IRS computer works, and what it knows about your finances.

The computer gathers data from what is reported to the IRS about you, usually on Form W2 or Form 1099.  The W2 is reported to the IRS at the beginning of every year, telling them where you work and how much you are paid.  If you have a bank account that pays interest, your bank will send the IRS a Form 1099 – now they know where you bank.  And if you work as a subcontractor or receive retirement income, you should receive a 1099 showing the amount you were paid, and the source. The IRS computer receives this, too.

The IRS computer sees that you owe taxes, and has information about where you work, and is programmed to put two and two together to try to contact your employer to take your paycheck.

If you call, be prepared to be immediately questioned by an IRS agent manning the phone lines about your finances, in an effort to supplement the information known by the computer.  They will want to know about all of your bank accounts, retirement accounts, real estate, cars, income, and living expenses.

3.     Learn if the IRS has sent a Final Notice of Intent to Levy.

Without the Final Notice of Intent to Levy letter, the IRS cannot make a computer match to levy your income, bank accounts, or property.  If you are unsure if the IRS has sent the Final Notice of Intent to Levy, the IRS will make account records available that will show if it has been sent.  That way, we know if you are protected, or need to act.

Even if the computer has sent a final notice, tax laws give us the right to stop the levy by filing an appeal.This is known as a collection due process appeal, and can be filed up to one year after the IRS sends the final notice. It typically takes the IRS 4-6 months to process the appeal, and assign the file to a Settlement Officer for a hearing. At the hearing, alternatives to levy can be negotiated, like an installment agreement, or an offer in compromise settlement. During this entire time, no levy should occur, giving you the ability to resolve without facing a loss of property by levy.

4.     Find out how much time is left on the 10 years the IRS has to collect from you.

The collection of tax debts does not go on forever. Under Internal Revenue Code section 6502 gives the IRS 10 years. After the 10 years are over, the IRS is required by law to give you a credit for the unpaid taxes, which results in your account balance being reduced to zero. You would then be done with the IRS.

The IRS makes the collection end dates available, and will provide written records to show the clearing of your taxes after the 10 years.

If you have received an IRS computer-generated collection letter, and there is a short time left on the 10 years, consideration should be given to whether now is the time to pick up the phone and call.

Sometimes, sitting tight and not contacting the IRS can be the best approach under the right circumstances, such as if the IRS does not have computer information about your finances, or if a Final Notice of Intent to Levy has not been sent.

Chances are the collection of your tax debt is between you and a machine. Understanding how the IRS uses a computer to collect taxes, and the limitations on what the computer can do, is essential to protect yourself before picking up the phone.