Topic No. 201 The Collection Process

If you don't pay your tax in full when you file your tax return, you'll 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 expires.

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.

The unpaid balance is subject to interest that compounds daily and a monthly late payment penalty. It's 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 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. The rate and any applicable fees your credit card company or bank charges may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. If you can't pay in full, you should send in as much as you can with the notice and explore other payment arrangements.

If you're not able to pay your balance in full immediately, you may qualify for a payment plan. One option is a short-term payment plan of up to 180 days, available for individual taxpayers who owe up to $100,000. If you cannot pay immediately or within 180 days, you may qualify to pay monthly through an installment agreement. You can apply for a payment plan using the Online Payment Agreement (OPA) Application or you may complete Form 9465, Installment Agreement Request and mail it in with your bill. You may also request an installment agreement over the phone by calling the phone number listed on your balance due notice.

There's a user fee to set up an installment agreement. For low-income taxpayers, the user fee is reduced and possibly waived or reimbursed if certain conditions apply. Interest and late payment penalties will continue to accrue while you make installment payments. For more information about payment plans and payment methods, see Additional Information on Payment Plans and Topic No. 202.

If you can't full pay under an installment agreement, you may apply for 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, you must have filed all tax returns, made all required estimated tax payments for the current year, and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees. Taxpayers in an open bankruptcy proceeding aren't eligible. To confirm eligibility, you may use the Offer in Compromise Pre-Qualifier tool. For additional information on OICs, refer to Topic No. 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 can't 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 can't 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, Form 433-A, or Form 433-B) and provide proof of your financial status (this may include information about your assets and your monthly income and expenses). You should  know that if we do delay collecting from you, your debt continues to accrue penalties and interest until the debt is paid in full. During a temporary delay, we will again review your ability to pay. 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 No. 202.

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

It's important to contact us and make arrangements to pay the tax due voluntarily. If you don't contact us, we may take action to collect the taxes.

We may file a Notice of Federal Tax Lien in the public record to notify your creditors of your tax debt. 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 the IRS sends the first notice demanding payment of the tax debt assessed against you and you fail to pay the amount in full. The filing of a Notice of Federal Tax Lien may affect your ability to obtain credit. Once a lien arises, the IRS generally can't 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.

In certain situations, the IRS may withdraw a Notice of Federal Tax Lien even when you still owe the tax debt. The Notice of lien may be withdrawn if the IRS determines:

  1. The Notice of lien was not filed according to IRS procedures;
  2. You entered into an installment agreement to satisfy the liability unless the installment agreement provided for the Notice of lien;
  3. Withdrawing the Notice of lien will allow you to pay your taxes more quickly; or
  4. Withdrawing the Notice of lien is in your best interest and in 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) and sell the property to satisfy the tax debt. In addition, any future federal tax refunds or state income tax refunds that you're due may be seized and applied to your federal tax liability. See Topic No. 203 for refund offsets.

You may call the IRS at 800-829-1040 (see Telephone and Local Assistance for hours of operation) 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, Publication 1, Your Rights as a Taxpayer, Publication 594, The IRS Collection Process, and Publication 1660, Collection Appeal Rights.

For more information about making payments, online payment agreements, and offers in compromise, visit our Payments page.