Topic 201 - The Balance Due Collection Process

If you do not pay your tax in full when you file your tax return, you will receive a bill for the amount you owe. This bill starts the collection process, which continues until your account is satisfied or until the IRS may no longer legally collect the tax; for example, when the time or period for collection has expired.

The first notice you receive will be a letter that explains the balance due and demands payment in full. It will include the amount of the tax, plus any penalties and interest accrued on your unpaid balance from the date the tax was due.

IRS electronic payment options are the best way for you to pay federal taxes. Paying electronically is the most convenient and secure way to make tax payments. You can make electronic payments online, by phone or from a mobile device. Paying electronically is safe, the IRS uses the latest encryption technology and does not store banking information. You determine the payment date and you will receive an immediate confirmation from the IRS. It’s quick, easy, secure and much faster than mailing in a check or money order. Electronic payment options are available on the IRS.gov Payments page. Direct Pay is a secure service you can use to pay your individual tax bill or estimated tax payment directly from your checking or savings account at no cost to you. In just five easy steps you’ll receive instant confirmation that your payment has been submitted.

Direct Pay is the recommended way to pay your individual and estimated tax bill. However, if you decide to pay by mail, enclose a check or money order with a copy of your notice. Make it payable to the United States Treasury and provide your name, address, daytime phone number, SSN, tax period and form number (2014 F1040) on the front of your payment.

If you cannot pay in full, you should send in as much as you can with the notice and explore other payment arrangements. For tax payment options, refer to Topic 202.

The unpaid balance is subject to interest that compounds daily and a monthly late payment penalty. It is in your best interest to pay your tax liability in full as soon as you can to minimize the penalty and interest charges. You may want to investigate and consider other methods of financing full payment of your taxes such as obtaining a cash advance on your credit card or getting a bank loan. Often, the rate and any applicable fees your credit card company or bank charges is lower than the combination of interest and penalties imposed by the Internal Revenue Code.

If you are unable to pay your balance in full immediately, we may be able to offer you a monthly installment agreement. To request an installment agreement, use the Online Payment Agreement Application (OPA) or complete Form 9465 (PDF), Installment Agreement Request, and mail it in with your bill. In some cases, you can establish an installment agreement over the phone.

Direct debit installment agreements offer a lower user fee than other installment agreements and help you to avoid defaulting on your agreement by allowing timely payments automatically. To have the payment directly debited from your bank account, complete lines 13a and 13b of Form 9465. Interest and late payment penalties will continue to accrue while you make installment payments. For additional information on installment payments, refer to Topic 202.

If you cannot full pay under an installment agreement, you may propose an offer in compromise (OIC). An OIC is an agreement between a taxpayer and the IRS that resolves a taxpayer's tax liability by payment of an agreed upon reduced amount. Before an offer can be considered, all filing and payment requirements must be current. Taxpayers in an open bankruptcy proceeding are not eligible. To confirm eligibility, the Offer in Compromise Pre-Qualifier is available on IRS.gov.

For additional information on OICs, refer to Topic 204.

If you need more time to pay, you may ask that we delay collection and report your account as currently not collectible. If the IRS determines that you cannot pay any of your tax debt due to a financial hardship, the IRS may temporarily delay collection by reporting your account as currently not collectible until your financial condition improves. Being currently not collectible does not mean the debt goes away. It means the IRS has determined you cannot afford to pay the debt at this time. Prior to approving your request to delay collection, we may ask you to complete a Collection Information Statement ( Form 433-F (PDF), Form 433-A (PDF) or Form 433-B (PDF)) and provide proof of your financial status (this may include information about your assets and your monthly income and expenses). If we do delay collecting from you, your debt will increase because penalties and interest are charged until you pay the full amount. The IRS may temporarily suspend certain collection actions, such as issuing a levy (explained below), until your financial condition improves. However, we may still file a Notice of Federal Tax Lien (explained below) while your account is suspended. Please call the phone number listed on your bill to discuss this option. For additional information on currently not collectible, refer to Topic 202.

If you are a member of the Armed Forces, you may be able to defer payment. See Publication 3, Armed Forces' Tax Guide.

It is important to contact us and make arrangements to pay the tax due voluntarily. If you do not contact us, we may take action to collect the taxes including:

  1. Filing a Notice of Federal Tax Lien
  2. Serving a Notice of Levy, or
  3. Offsetting a refund to which you are entitled

A federal tax lien is a legal claim to your property, including property that you acquire after the lien arises. The federal tax lien arises automatically when you fail to pay in full the taxes you owe within ten days after we make an assessment of the tax and send the first notice of taxes owed and demand for payment. The government may also file a Notice of Federal Tax Lien in the public records, which publicly notifies your creditors that the IRS has a claim against all your property, including property acquired by you after the filing of the Notice of Federal Tax Lien. The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating. Once a lien arises, the IRS generally cannot release the lien until the tax, penalty, interest, and recording fees are paid in full or until the IRS may no longer legally collect the tax.

The IRS will withdraw a Notice of Federal Tax Lien if the Notice was filed while a bankruptcy automatic stay was in effect. The IRS may withdraw a Notice of Federal Tax Lien if the IRS determines:

  1. The Notice was filed too soon or not according to IRS procedures;
  2. You enter into an installment agreement to satisfy the liability unless the installment agreement provides otherwise;
  3. Withdrawal will allow you to pay your taxes more quickly; or
  4. Withdrawal is in your best interest, as determined by the National Taxpayer Advocate, and the best interest of the government.

The IRS may levy (seize) assets such as wages, bank accounts, Social Security benefits and retirement income. The IRS also may seize your property including your car, boat or real estate to sell the property to satisfy the tax debt. In addition, any future federal tax refunds or state income tax refunds that you are due, may be seized and applied to your federal tax liability. See Topic 203 for refund offsets.

You may call the IRS at 800-829-1040 to discuss any IRS bill. Please have the bill and your records with you when you call.

You have rights and protections throughout the collection process. For more information, refer to Taxpayer Bill Of Rights on IRS.gov, Publication 1 (PDF), Your Rights as a Taxpayer, Publication 594 (PDF), The IRS Collection Process, and Publication 1660 (PDF), Collection Appeal Rights.

For more information about making payments, online payment agreements and offers in compromise, go to IRS.gov/Payments.

Forms and publications are available online at IRS.gov and by calling 800-TAX-FORM (800-829-3676).

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Page Last Reviewed or Updated: June 26, 2015