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5 Ways The IRS Can Collect Delinquent Tax Debt

IRS Debt Collection

The IRS has a variety of methods it can use to collect delinquent tax debt. If you don’t voluntarily resolve your tax debt problems you may face IRS levies, wage garnishments, or other IRS enforced collection actions.

Key Insights We Will Discuss:
Ways the IRS can collect delinquent tax debt.
Your options when facing an imminent levy.
How to avoid each type of IRS collection action.

Bank Account Levies
The IRS can levy the entire balance in your bank account up to the amount you owe in back taxes, penalties, and interest. If you owe more than your bank account balance, the whole account can be seized.

Before a bank levy takes place, you’ll receive a Collection Due Process (CDP) notice. If you request a CDP hearing within 30 days, you can negotiate a deal to avoid the bank levy.

Tax Refund Offset
The IRS can take your tax refund check and apply it to your outstanding tax debt. If you owe the IRS money, be prepared to have your refund seized before you ever receive it.

You can reduce your withholdings to minimize the amount that gets seized, but otherwise it’s difficult to avoid this collection tactic without paying off your full balance.

Wage Garnishment
A wage garnishment is a continuous levy, meaning that the IRS only needs to issue one levy in order to take a portion of every paycheck you receive until your tax debt is paid. You may have a hard time paying your bills with the income you’re left with after the wage levy.

You’ll receive a CDP notice before the IRS can begin levying your wages. If you have a high income, you’ll generally pay less each month by negotiating an installment agreement and avoiding the wage garnishment.

Social Security Benefits Levy
The IRS does have the power to levy your Social Security benefits. However, the IRS typically only levies Old Age and Survivor benefits, and the levy amount is limited to 15% of your monthly payment.

You have 30 days to respond to an IRS notice regarding a levy of your Social Security benefits. If you’re experiencing a financial hardship, you may be able to avoid the levy by having your account classified as Currently Not Collectible.

Retirement Account Levy
Retirement account levies are less common than bank levies, but the IRS does have the power to seize funds in your 401(k), IRA, or other types of retirement accounts.

If you can’t afford monthly payments, you may want to consider submitting an Offer in Compromise. If your offer is accepted, you can avoid a retirement account levy and settle your tax debt for less than what you owe.

Executive Summary:
— The IRS has a variety of ways to collect delinquent tax debt, including bank levies, wage garnishments, and Social Security benefits levies

— You can avoid these enforced collection actions by negotiating a payment plan or a tax debt settlement.

Have a question? Contact Venar Ayar.

Venar Ayar

Venar Ayar

Ayar Law’s expertise is not only in dealing with the tax code, but in favorably resolving Federal and State tax problems. We know the procedural rules inside and out, and we know how things actually work at the IRS. Feel free to call or email Venar Ayar anytime (no charge) and he’ll be happy to answer any tax law questions you might have. 248.262.3400

2 thoughts on “5 Ways The IRS Can Collect Delinquent Tax Debt

  1. There are a number of comments/questions on your previous post about the situation of Americans abroad with non-U.S. assets. What is your view on the ability of the IRS to collect U.S. tax debts by attacking non-U.S. based property?

  2. Avatar Winston Payne says:

    You’re not seriously expecting an answer, are you? That’s not how the compliance industry rolls.

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