If you owe the government back taxes, the IRS will initiate processes to collect the debt you owe. This involves sending a letter notifying you of your tax debts, your rights, the reasons for collection, and the collection procedures that may be taken against you. Any penalties, interest, and other taxes due will also be mentioned.
Filing incomplete tax returns will cause the IRS to send collection notices usually labelled ‘CP’ with a number, which increase in severity if taxes are not paid. These notices, in order of progression are:
- CP-14: The first notice, which begins the IRS collection process, is a bill of unpaid taxes.
- CP-501: The second notice usually arrives after 5 weeks of inaction on your part.
- CP-503: The third notice arrives in another 5 weeks to remind you of your tax debts.
- CP-504: The fourth notice says ‘Intent to Levy’, which threatens to seize your state income tax refunds.
- Letter 1058: Finally, you will receive the ‘Notice of Intent to Levy and Notice of Your Right to a Hearing’ 30 days after which the IRS is at liberty to take serious action like bank levies.
Failure to comply with IRS rules and regulations, and not settling your tax debts, can result in one or more of the following collection methods:
- Wage garnishments
- Property seizure
- Cancellation of business license
- Closure of business
Once the IRS initiates a bank levy or tax lien, it becomes extremely difficult to avoid any negative consequences. Bank levies occur when the IRS seizes accounts, assets, or property to settle tax debts. Tax liens occur when the IRS places a claim against your property to settle tax debts. Tax liens are public record, affect your credit report, and can apply to property acquired after initiation of the liens.
When it comes to dealing with liens and levies, there are three things you can do:
- Pay off the debt in full, sending the full amount including penalties and interest as soon as possible.
- Ask the IRS to grant you a monthly installment payment plan so you can settle debts in the span of a few months.
- Appeal for an offer in compromise or, in extreme cases, file for bankruptcy.
In this situation, it is best to trust a certified tax professional with years of experience. The tax experts at Long Island Tax Resolution will defend you against the IRS and pursue a tax resolution plan that may include an installment payment plan or offer in compromise.
We will analyze your unique situation and determine which tax relief strategies would be appropriate, embarking with you on a personalized tax relief plan.
Contact us today to learn more.