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This publication tells you the steps the Internal Revenue Service (IRS) may take to collect your balance due account. We send this publication with your final bill if our records show you owe overdue tax, penalty, or interest. We may:
We urge you to resolve your account to prevent possible enforcement action.
A number of IRS forms and publications apply to various situations discussed in this publication. To obtain these forms and publications, please visit our web site www.irs.gov , call us at 1-800-TAX-FORM (1-800-829-3676), write to us, or visit your local library or IRS office.
Please note that the information in this document applies to all taxpayers including individuals who owe income tax and employers who owe employment tax. A separate section on page 11 describes special rules that apply to employers only.
This document includes a summary of your rights and responsibilities concerning paying Federal taxes, in addition to discussing the legal authority that allows the IRS to collect taxes. Publication 594 is not a precise and technical analysis of the law; it is for information only.
Existe una versión de esta publicación en español, la Publicación 594SP, que puede obtener en la oficina local del Servicio de Impuestos Internos.
If you receive a tax bill in the mail:
If it is correct – Pay the full amount now (see page 5)
If the bill is correct and you are unable to pay in full then:
If you received a bill that is not correct then gather copies of:
Call the toll-free number if you require further assistance (1-800-829-1040) You should understand the possible immediate and long-term effects of not paying your taxes when they are due or defaulting on an installment agreement. It can adversely affect your credit rating. Avoid having overdue taxes next year
If you believe your bill is wrong, let us know as soon as possible:
To help us correct the problem, gather a copy of the bill along with copies of any records, tax returns, and canceled checks, etc., that will help us understand why you believe your bill is wrong.
If you write to us, tell us why you believe your bill is wrong. With your letter, include copies of all the documents you gathered to explain your case. Please do not send original documents. If we find you are correct, we will adjust your account and, if necessary, send you a corrected bill.
You have the right to be treated professionally, fairly, promptly, and courteously by IRS employees and Private Collection Agencies (PCAs) contacting you on behalf of the IRS. Among other rights, you have the right to:
For details about your rights, see Publication 1, Your Rights as a Taxpayer. You should have received a copy of it with your first bill.
When dealing with the Internal Revenue Service (IRS), you may choose to represent yourself, or you may have an attorney, a certified public accountant, an enrolled agent, or any person enrolled to practice before the IRS represent you. For example, you may want your representative to respond to a tax bill that you believe is incorrect. Also, you can be represented by a member of your immediate family, or in the case of a business, by regular full-time employees, general partners or bona fide officers.
If you want your representative to appear without you, and to receive or inspect confidential material, you must file a Form 2848, Power of Attorney and Declaration of Representative, with the IRS. You may also authorize an individual to receive or inspect confidential material, but not represent you before the IRS, by filing a Form 8821, Tax Information Authorization.
Other items to note
Low Income Taxpayer Clinics (LITCs) are independent organizations that provide low income taxpayers with representation in federal tax controversies with the IRS for free or for a nominal charge. The clinics also provide tax education and outreach for taxpayers with limited English proficiency or who speak English as a second language. Publication 4134, Low Income Taxpayer Clinic List, provides information on clinics in your area. It is available at www.irs.gov , your local IRS office, or by calling 1-800-TAX- FORM (1-800-829-3676).
If you are involved in bankruptcy proceedings, call the number on your tax bill or 1-800-8291040 if you cannot find the bill, or contact your local IRS office. While the proceeding may not eliminate your tax debt, it may temporarily stop the IRS from collecting.
Help for an innocent spouse. Generally, both you and your spouse are responsible, jointly and individually, for paying any tax, interest, or penalties due on your joint return. In some cases, a spouse (or former spouse) may be relieved of liability on a joint return. For more information, see Publication 971, Innocent Spouse Relief. If you believe you should not be held responsible for any joint liability, you must file a claim for relief on Form 8857, Request for Innocent Spouse Relief. You must file Form 8857 within 2 years after the first date the IRS attempted to collect the tax following July 22, 1998. Collection activity that starts the 2-year period includes:
A refund offset notice dated March 7, 2005 or later. (A refund offset notice advises you that the IRS applied your income tax refund to an amount you owed on a joint tax return.). A claim for the joint liability filed in a proceeding which involves your property, for example, a proof of claim in a bankruptcy proceeding.. The filing of a suit by the United States against you to collect the joint liability.. The issuance of a notice informing you of the IRS’ intent to levy and your right to a Collection Due Process (CDP) hearing with respect to a joint liability.
Appeal process. If you disagree with the decision of an IRS employee at any time during the collection process, you may ask that employee’s manager to review your case.
When you ask for a review, the employee will refer you to a manager. The manager will either speak with you then or will return your call by the next work day.
If you disagree with the manager’s decision, you have the right to file an appeal under the Collection Appeals Program. This program enables you to appeal most collection actions we may take, including filing a lien, placing a levy on your wages or bank account, or seizing your property. You also will have an opportunity to request a CDP hearing with the IRS Office of Appeals after the initial filing of a Notice of Federal Tax Lien for each liability or prior to the initial levy action, unless collection of the tax is in jeopardy or the levy is on your state tax refund. In these 2 cases, you may ask for a CDP hearing after the levy. See Publication 1660, Collection Appeal Rights, for more information.
Time period for collecting taxes. By law, the IRS has the authority to collect outstanding Federal taxes for 10 years from the date your tax liability was assessed. The 10-year collection period is suspended:
The amount of time the suspension is in effect will be added to the time remaining in the 10-year period. For example, if the 10-year period is suspended for 6 months, the time left in the period we have to collect will increase by 6 months.
There is a special program to help you with tax problems that cannot be resolved through normal IRS channels. The Taxpayer Advocate Service is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.
You may be eligible for assistance if you:
The service is free, confidential, tailored to meet your needs, and available for businesses as well as individuals. There is at least one local taxpayer advocate in each state, the District of Columbia, and Puerto Rico. Because advocates are part of the IRS, they know the tax system and how to navigate it. If you qualify, you will receive personalized service from a knowledgeable advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.
You may contact the Taxpayer Advocate Service by:
When you file your tax return, we check to see if the math is accurate and if you have paid the correct amount. If you have not paid all you owe, we send a bill called a Notice of Tax Due and Demand for Payment. The bill includes the taxes plus interest and penalties. It is in your best interest to pay your tax liability in full to minimize the amount of interest and penalty charged. You may pay your taxes by credit card, electronic funds transfer, check, money order, or cash. Take advantage of the Electronic Federal Tax Payment System (EFTPS) to pay by electronic funds transfer. See Publication 966, Electronic Choices to Pay All Your Federal Taxes, access the website at www.irs.gov for more information about partial payment installment agreements.
For all installment agreements, the amount of your installment payment will be based on the amount you owe and your ability to pay that amount within the time left in the 10-year period. To be eligible for an installment agreement, you must file all required returns. If you are an employer, you must be current with federal tax deposits.
If you owe less than $25,000, you may be eligible to use our Online Payment Agreement web application.
You may also request an installment agreement using Form 9465, Installment Agreement Request, or Form 2159, Payroll Deduction Agreement, by calling the number on your bill, or 1-800-829-1040 if you cannot find your bill or by visiting your local IRS office. If you choose to complete one of these forms to apply for an installment agreement, you should mail the completed form to the address listed on your bill.
When you arrange for an installment agreement, it may be to your advantage to pay by electronic funds withdrawal from your financial institution (Line 13 of Form 9465) or payroll deduction from your wages (Form 2159). These 2 types of payment arrangements will help you avoid termination of your installment agreement by ensuring timely payments and preventing enforced collection action. These types of agreements will also reduce the burden of having to mail the payments and will save you postage.
A user fee will be charged to set up your installment agreement. The fee is $52 for direct debit installment agreements, where payments are deducted directly from your financial institution, and $105 for other agreements. Taxpayers with income at or below established levels, based on the Department of Health and Human Services Poverty Guidelines, may apply and be qualified to pay a reduced user fee of $43 for establishing new agreements, including direct debit installment agreements.
We generally cannot levy against your property:
However, a Notice of Federal Tax Lien may be filed to secure the Government’s interest against other creditors.
If you already have an approved installment agreement from a previous tax debt and your financial situation has changed, we may be able to modify your monthly amount. A reinstatement fee of $45 will be charged, regardless of income level, if we change the monthly amount at your request. You may have to complete a Collection Information Statement explaining your financial situation.
If you have requested an installment agreement, and a decision to grant this agreement is pending, it is recommended that you make voluntary payments while approval is pending. Acceptance of these interim payments by the IRS should not be construed as acceptance of the proposed installment agreement. You will be notified in writing regarding the acceptance or rejection of your request for an installment agreement. You may ask the IRS Office of Appeals to review our rejection of your installment agreement. See Publication 1660, Collection Appeal Rights, for more information.
Termination of your installment agreement may cause the filing of a Notice of Federal Tax Lien and/or an IRS levy action. You may ask the IRS Office of Appeals to review our termination of the installment agreement due to your default. See Publication 1660, Collection Appeal Rights, for more information. Either the filing of a lien or a levy can be very damaging to your credit worthiness and cause financial difficulties. If a defaulted agreement is reinstated, the reinstatement fee of $45 will be charged, regardless of your income level.
If we determine that you cannot pay any of your tax debt, we may temporarily delay collection until your financial condition improves. You should know that if we do delay collecting from you, your debt will increase because penalties and interest are charged until you pay the full amount. During a temporary delay, we will again review your ability to pay. We may also file a Notice of Federal Tax Lien (see page 7) to protect the Government’s interest in your assets.
The IRS may accept an Offer in Compromise (OIC) to settle unpaid tax accounts for less than the full amount of the balance due. This applies to all taxes, including any interest, penalties, or additional amounts arising under the Internal Revenue laws. The OIC program is an option for those taxpayers who are unable to pay their tax account in a lump sum or through an installment agreement and have exhausted their search for other payment arrangements.
The IRS may legally compromise a tax liability for one of the following reasons:
For offers received after July 16, 2006, there are three types of OIC payment terms that the IRS and the taxpayer may agree to:
An OIC submitted as a lump sum cash offer, must include the $150 application fee and a nonrefundable payment of 20% of the offered amount, with the balance to be paid in no more than 5 installments from the notice of acceptance.
An OIC submitted as a periodic payment offer (short term or deferred) must include the $150 application fee and a nonrefundable initial proposed periodic payment with the offer. The remaining proposed periodic payments must continue to be made while the offer is being evaluated.
Taxpayers with income at or below established levels, based on the Department of Health and Human Services Poverty Guidelines, are not required to submit the $150 application fee, 20% of the amount of a lump sum cash offer, the first installment of a periodic payment offer, or subsequent installment payments for a periodic payment offer while that offer is being evaluated, as described above. Until further guidance is issued, you should use the worksheet to Form 656-A, Income Certification for Offer in Compromise Application Fee, to determine if you qualify as a low-income taxpayer who is not required to make these payments. The worksheet may be found in Form 656, Offer in Compromise.
You may submit an OIC by completing Form 656. If you are basing your offer on doubt as to collectability or promotion of effective tax administration, you must also submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals or Form 433-B, Collection Information Statement for Businesses, with supporting documentation. There may be instances where both a Form 433-A and Form 433-B must be submitted. After acceptance of an offer, you must remain current with filing and paying requirements for five years or until the amount of the offer is paid in full, whichever is longer. You may ask the IRS Office of Appeals to review our rejection of your Offer in Compromise. See Publication 1660, Collection Appeal Rights, for more information.
For additional information about the OIC program, visit www.irs.gov or see Form 656, Offer in Compromise.
Before we take any enforced collection action explained in this section, we will contact you to give you a chance to voluntarily pay what you owe. We will send you a Notice of Tax Due and Demand for Payment, a bill that tells you how much you owe in taxes. We may send you other bills asking for payment. If you have an income tax refund, we will offset the refund against your tax liability. If you do not pay your taxes in full and do not contact us to let us know why you cannot pay or why you disagree with our decision to take enforcement action, the law requires us to take action. We may:
These actions are the methods we can use to enforce the Notice of Tax Due and Demand for Payment. On the following pages, we explain collection actions or information gathering tools, and the rules that govern them.
If you have overpaid your taxes for one tax period, but owe taxes for another, the law allows us to apply your refund to reduce the unpaid tax. If you are a non-liable spouse and we offset a Federal income tax refund belonging to you and your liable spouse, you may request return of your share of the refund by filing Form 8379, Injured Spouse Allocation. See Publication 4183, Injured Spouse Claims, for more information.
Liens give us a legal claim to your property as security for payment of your tax debt. The federal tax lien arises when:
We then may file a Notice of Federal Tax Lien in the public records. By filing a Notice of Federal Tax Lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien was filed.
The lien attaches to all your property (such as your house or car) and to all your rights to property (such as the accounts receivable of your business).
Once a lien is filed, your credit rating may be harmed. A lien may affect your ability to get a loan, buy a house or a car, get a new credit card, or sign a lease.
Usually 10 years after a tax is assessed, a lien releases automatically if we have not filed it again or issued a Certificate of Release of Federal Tax Lien.
We will issue a Certificate of Release of the Federal Tax Lien:
You must pay all fees that a state or other jurisdiction charges the IRS to file and release the lien. These fees will be added to the amount you owe. See Publication 1450, Instructions on How to Request a Certificate of Release of Federal Tax Lien.
We will issue a Certificate of Release of Federal Tax Lien within 14 days after we determine that at the time the IRS filed the Notice of Federal Tax Lien the taxpayer had no outstanding tax liability due for the periods listed on the Notice, the assessment was invalid, or the time period for collecting the tax ended.
If we knowingly or negligently do not release a Notice of Federal Tax Lien when it should be released, you may be entitled to recover economic damages. Some limitations may apply. You must file an administrative claim with the IRS Technical Services Advisory Group assigned to your state, area or county where you live or in which the Notice of Federal Tax Lien was filed. Mail your written claim to the attention of the Advisory Group Manager at the address listed in Publication 4235, Technical Services (Advisory) Group Addresses. If the claim is denied, you may sue the Federal Government, but not IRS employees, for economic damages.
The amount shown on the Notice of Federal Tax Lien is the unpaid balance on the date the Notice is created. The Notice will not be updated to show changes in the amount you owe that occur because of the accrued interest and additions to tax or because of your payments. However, at any time, you may request an updated lien payoff amount to show the remaining balance due by calling the toll-free customer service telephone number at 1-800-913-6050. An IRS employee will issue you a letter with the current amount that must be paid before we release the Notice of Federal Tax Lien.
If you sell property subject to a tax lien, such as your home, or pay your tax liability equal to the value of the property secured by the tax lien, you may apply for a Certificate of Discharge. Each application for a Certificate of Discharge of a tax lien requests release of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. For instructions regarding how to apply for a certificate of discharge, see Publication 783, Instructions on How to Apply for a Certificate of Discharge of Property from Federal Tax Lien.
If you are selling your primary residence, you may apply for a taxpayer relocation expense allowance. In general, this allowance will be granted if the IRS determines you are unable to pay relocating expenses, but certain conditions and limitations apply. You may apply for the relocating expense allowance by submitting Form 12451, Request for Relocation Expense Allowance, to the IRS.
In some cases, a creditor may refuse to extend credit to you unless their lien will be satisfied before the tax lien. Subordination is the process that can make a Federal tax lien secondary to another lien. For example, you may ask for a subordination of the tax lien to refinance the mortgage on your house. For more information, see Publication 784, How to Prepare an Application for a Certificate of Subordination of Federal Tax Lien.
We will withdraw a Notice of Federal Tax Lien if the Notice was filed during a bankruptcy automatic stay period.
We may withdraw a Notice of Federal Tax Lien if we determine:
We will give you a copy of the withdrawal, and if you send us a written request, we will send a copy to other institutions you name.
We are required by law to give written notice of your right to a Collection Due Process (CDP) hearing not more than 5 business days after the first filing of a Notice of Federal Tax Lien for each tax liability. Normally, we will notify you by certified mail sent to your last known address, although we may give you this notice in person, or leave it at your home or your usual place of business. You may request a CDP hearing with the IRS Office of Appeals by sending a request for a hearing to the address shown on your notice. You must file your request by the date shown on your notice. Refer to Form 12153, Request for a Collection Due Process or Equivalent Hearing, for more information about filing a hearing request and for a list of issues you may wish to discuss at your CDP hearing.
At the conclusion of your CDP hearing, the IRS Office of Appeals will issue a determination. Appeals may determine that the Notice of Federal Tax Lien should remain filed, or it may determine that the Notice of Federal Tax Lien should be withdrawn or the lien should be released, discharged or subordinated. You will have 30 days after the date of the determination, to seek review of the determination in the United States Tax Court. In addition, you may appeal under the Collection Appeals Program (CAP), the proposed filing of a Notice of Federal Tax Lien or the actual filing of a Notice if CDP rights are not available. You may also appeal, under CAP, our denial of your request for withdrawal of the Notice of Federal Tax Lien and our denial of your request for a Certificate of Discharge or a Certificate of Subordination of Federal Tax Lien. See Publication 1660, Collection Appeal Rights, for more information.
If a Notice of Federal Tax Lien is filed to collect your tax liabilities, call the number on the notice informing you that a lien has been filed, or 1-800-829-1040 if you cannot find the notice. The contact person listed on the notice or other representative will answer your questions and attempt to resolve your tax problem. You also may ask the representative’s manager to review your case. If the matter is still unresolved, the manager can explain your rights to appeal to the IRS Office of Appeals.
A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.
If you do not pay your taxes (or make arrangements to settle your debt):
We usually levy only when the following three conditions have occurred:
You may request a CDP hearing with the Office of Appeals by sending a request for a CDP hearing to the address shown on your notice. You must file your request within 30 days of the date on your notice. Refer to Form 12153, Request for a Collection Due Process or Equivalent Hearing, for more information about filing a hearing request and for a list issues you may wish to discuss at your CDP hearing.
At the conclusion of your hearing, the Office of Appeals will issue a determination. You will have 30 days after the date of the determination to seek review of the determination by the United States Tax Court. In addition, you may appeal a proposed or actual levy under the Collection Appeal Program if CDP rights are not available. See Publication 1660, Collection Appeal Rights, for more information.
If your property is levied or seized, call the number on the notice informing you that a levy or seizure has occurred, or 1-800-829-1040 if you cannot find the notice. The contact person listed on the notice or other representative will answer your questions and attempt to resolve your tax problem. You also may ask the representative’s manager to review your case. If the matter is still unresolved, the manager can explain your rights to appeal to the IRS Office of Appeals.
A levy on your wages, salary, commissions, or other payments for personal services does not need to be served each time you are paid. Once we serve a levy, the levy continues until your tax debt is paid in full or other arrangements are made to satisfy the debt, or the time period for collecting expires.
If we place a levy on your bank account, the levy attaches deposits that have cleared and funds that are available for withdrawal when the levy is received, up to the amount of the levy. The bank must wait until 21 days after a levy is received before sending the money. The holding period allows you time to resolve any dispute about account ownership. After 21 days, the bank must send the money, plus, if applicable, any interest earned on that amount.
You are not, however, entitled to notice of a third-party summons we issue solely to aid in the collection of an assessed liability or judgment. If your liability is assessed and we issue a third-party summons as part of our effort to collect that assessed liability, you will not be given notice of that summons, nor will you be allowed to file a motion to quash or intervene in a suit to enforce the summons.
Summonses are frequently served to enable the Service to determine which individuals are responsible for a trust fund recovery penalty. Additional information on the trust fund recovery penalty is provided in this publication.
Failure or neglect to appear before the Service after a summons is issued may result in further legal actions against you. These actions may include an enforcement suit, a contempt hearing, and a contempt order.
If you are unable to appear before the Service on the appointed day and time listed on your summons, it is imperative that you contact the office/individual issuing the summons. The phone number and address will be on the summons.
To encourage prompt payment of withheld employment taxes and collected excise taxes, Congress passed a law that provides for the Trust Fund Recovery Penalty. (These taxes are called Trust Fund taxes because the employer actually holds the employee’s withheld taxes or the collected excise taxes in trust until the employer makes a federal tax deposit in the amount of the withheld or collected taxes.)
If we plan to assess you for the trust fund recovery penalty, we will send you a letter stating that you are a responsible person. You have 10 days after we send our letter to tell us why you disagree and 60 days after we send our letter to appeal our proposed assessment to the IRS Office of Appeals. If you do not respond to our letter, we will assess the penalty against you and send you a Notice and Demand for Payment. We may assess this penalty against a responsible person whether or not the company is still in business.
A responsible person is an individual or group of people (there may be more than one responsible person) who had the duty to perform and the power to direct the collection and payment of trust fund taxes. A responsible person may be:
We may assess the penalty against anyone who is responsible for collecting and paying withheld income and employment taxes, or for paying collected excise taxes, and who willfully fails to collect and pay them. Willfulness exists if the responsible person:
In addition to these civil penalties and remedies, there are possible criminal ones, as well.
The amount of the penalty is equal to the unpaid balance of the trust fund taxes. The penalty is computed based on:
For collected excise taxes, the penalty is based on the unpaid amount of collected excise taxes.
Once we assert the penalty, we may take collection action against your personal assets if you do not pay the penalty after being sent a Notice of Tax Due and Demand for Payment. For instance, we may file a Notice of Federal Tax Lien against you, if you are a responsible person.
You have the right to appeal a proposed assessment of the Trust Fund Recovery Penalty. See Publication 5, Your Appeal Rights and How to Prepare a Protest if You Don’t Agree.
By law, some property cannot be levied or seized. We may not levy any of your property unless we have determined that we expect there to be net proceeds to apply to the liability. In addition, we may not levy your property on the day you attend a collection interview in response to a summons.
Other items we may not levy include:
*These amounts are indexed annually for inflation (these amounts are for calendar year 2007).
Use Publication 1494, Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income— Forms 668-W(c) and 668-W(c)(DO), to determine the amount of earned income exempt from levy.
Getting Help for Federal Taxes from the Federal Government
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