The IRS Is Done Waiting: What Happens After Your Tax Debt Hits Collections

Filing a tax return does not end the IRS process.

For many taxpayers, filing starts the next phase.

Once a balance due return is processed, the IRS begins moving the account through its collection system. That system includes notice generation, penalty accrual, interest accrual, compliance review, and possible enforcement sequencing.

The taxpayer may feel finished.

The IRS is not finished.

That difference matters.

A return with a balance due does not simply sit in a file waiting for someone to review it. The IRS system posts the liability, updates the taxpayer account, checks payment activity, and begins the collection notice process. If the taxpayer takes no action, the automated collection system continues moving.

Now that your return has been filed, the next set of decisions begins. Before IRS processing or planning opportunities are missed, speak with Steve Perry, EA about your situation. Call 678-717-9818, email [email protected], or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.

Many taxpayers misunderstand what “in collections” really means.

They think collections begin when the IRS threatens a levy.

That is the point where it becomes critical and the real threat of asset forfeiture becomes present.

Collections begin much earlier, when the IRS account reflects an unpaid balance and the automated system begins issuing notices. At first, those notices may look routine almost friendly. They may simply state that tax, penalties, and interest are due.

But each notice is part of a sequence.

The IRS collection process usually develops through several stages:

• The return is filed and processed or the service has enough information to file a substitute for return

• The balance due posts to the taxpayer account

• The IRS applies penalties and interest

• The IRS sends balance due notices

• The taxpayer either responds or does not respond

• The account continues moving through collection status

• More serious notices may follow

• Lien or levy risk can increase if the account remains unresolved

The important point is simple.

The IRS system keeps moving even when the taxpayer does not.

That is why post filing inaction creates risk. The taxpayer may be waiting for a better time, more cash, or a clearer plan. The IRS system is not waiting for those things. It is following its internal process.

This is especially important for taxpayers who owe from more than one year. The IRS does not look only at the most recent return. Prior balances, prior collection activity, missed estimated payments, unfiled returns, and broken agreements can all affect how the account is viewed.

A taxpayer with a fresh balance due may have options.

A taxpayer with a fresh balance due and prior compliance problems may have less room to maneuver.

This is where timing matters.

After filing, taxpayers often still have useful options, including:

• Reviewing the IRS transcripts and internal records for errors

• Correcting estimated tax problems before they continue

• Evaluating whether an installment agreement is appropriate

• Considering Currently Not Collectible status where the facts support it

• Reviewing penalty relief possibilities

• Addressing missing returns before they damage negotiations

• Planning for next year before the same problem repeats

The mistake is assuming nothing can be done until the IRS becomes aggressive.

That assumption gives away time.

If you are unsure what happens next after filing or whether your return could trigger IRS correspondence, speak with Steve Perry, EA to review your position. Call 678-717-9818, email [email protected], or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.

Taxpayers also need to understand the difference between filing compliance and collection compliance.

Filing compliance means the required return was filed.

Collection compliance means the taxpayer is addressing the balance due and not increasing the balance going forward.

Those are not the same thing.

A taxpayer can file the return correctly and still fall into collection trouble. A taxpayer can file on time and still receive IRS notices. A taxpayer can be fully honest on the return and still face liens, levies, or garnishments if the balance is not addressed. Remember the return is a position statement.If that statement indicates a balance due, it should be paid in full as soon as possible or arrangements made.

Short term planning involves dealing with the balance due as well as

·For wage earners, that may mean reviewing withholding.

·For self-employed taxpayers, that may mean reviewing estimated tax payments.

·For business owners, that may mean reviewing payroll tax compliance, cash flow, deposits, and whether the current year is already creating another balance due.If it is, increase quarterly estimated payments

This is why the period immediately after filing season is so important. The taxpayer has fresh information. The prior year’s result is known. The current year can still be adjusted. The IRS transcripts can be reviewed on a regular basis before the situation becomes harder to control.

Waiting until the next filing season is often the worst choice.

By then, several things may have happened:

• Penalties may have grown

• Interest may have increased

• Notices may have escalated

• Appeal windows may have narrowed

• Estimated tax problems may have continued

• Another balance due may already be forming

• The IRS may have moved closer to enforced collection

Federal tax liens are another concern.

A lien does not mean the IRS has taken property. It means the government has asserted a legal claim against the taxpayer’s property rights. That can affect financial flexibility, property sales, refinancing, business credit, and negotiations.

Levies are different.

A levy is an actual taking of property or rights to property. That can include bank accounts, wages, receivables, and other assets. Taxpayers who wait until levy action is imminent are often trying to solve the problem under pressure.

That pressure is avoidable in many cases.

The earlier the taxpayer reviews the account, the more room there may be to build a practical response.

Steve Perry, EA helps taxpayers understand where they are in the IRS process, what the notices mean, what options may still exist, and what steps should be taken before the account becomes more difficult to resolve. The value is not in panic. The value is in understanding the IRS sequence and responding before the system takes away choices.

Before assuming your tax situation is complete for the year, consider having Steve Perry, EA evaluate your next steps and planning opportunities. Call 678-717-9818, email [email protected], or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.

Filing season may be over.The time for planning and addressing any balances due continues.Tax planning should be done year around.

After filing season ends, many taxpayers miss critical planning windows that affect next year’s outcome. If you want to stay ahead of the process, speak with Steve Perry, EA now. Call 678-717-9818, email [email protected], or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.