The Collection Process

Most taxpayers file their tax returns and pay what they owe on time. If they don't, the Internal Revenue Service sends the taxpayer a bill. This begins the collection process. Along with the bill, the IRS automatically sends a Publication 1, "Your Rights as a Taxpayer," and Publication 594, "Understanding the Collection Process." These publications explain to taxpayers the various options and rights they have in dealing with the IRS.

Every taxpayer has the right to be treated fairly, promptly, professionally and courteously by IRS employees. The IRS has trained all of its personnel in the collection function to ensure they understand the various provisions in both the Internal Revenue Code and the Taxpayer Bill of Rights to ensure that taxpayers' rights are protected and respected.

The IRS recognizes that sometimes taxpayers are unable to pay what they owe. In that case, the taxpayer should contact the IRS as soon as possible, as there are a number of payment solutions the IRS may be able to offer to the taxpayer, including:

• Installment agreements - Last year, the IRS permitted 2.6 million taxpayers to pay their tax bills in monthly payments. This number is up from 1.1 million five years ago.
• Delaying collection - If the IRS determines that a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves.
• Offer in Compromise - Many taxpayers are actually able to settle their tax bill for less than the amount they owe. Last year, the IRS accepted 27,673 of these offers to collect nearly $300 million, compared to 1,995 offers accepted five years ago.

If the taxpayer does not respond to the notice or subsequent notices, the account becomes delinquent, and may be turned over to the Automated Collection System (ACS), where IRS personnel will contact the taxpayer by telephone to work out an agreeable payment solution. If after several attempts the IRS is still unable to contact the taxpayer, or cannot work out a payment solution, the account may then be turned over to a revenue officer for collection. The revenue officer will again try to settle the account with the taxpayer.

If the IRS is still unable to work out a payment solution, it may, as a final resort, take enforcement action. These actions could include filing a lien, serving a notice of levy, or in rare cases, seizure and sale of property. Seizures were made in less than 0.2 percent of the 6.6 million delinquent cases closed in Fiscal Year 1996. The IRS takes these actions only after giving the taxpayer every opportunity to either pay the debt or make arrangements to pay.

Once the IRS takes collection action, the taxpayer still has options. As a result of the Taxpayer Bill of Rights 2, certain collection enforcement actions that a taxpayer disagrees with may now be appealed either before or after the action occurs. Normally, the IRS will stop the collection action until the appeal is settled. Each taxpayer subject to collection actions receives Publication 1660, "Collection Appeal Rights for Liens, Levies and Seizures," which explains their right to make such an appeal and the procedures for requesting an appeal.

At any time before or during collection action, taxpayers who believe a pending collection action will create a significant hardship can apply for relief by submitting an "Application for Taxpayer Assistance Order (ATAO) to Relieve Hardship." The Taxpayer Advocate or a Problem Resolution Officer will review the application, and if appropriate, take steps to relieve the hardship.

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