The IRS Collection Process: What Ohio Taxpayers Should Expect

If you filed a tax return and unexpectedly owe more tax than you can pay—or if you completed an audit and additional tax has been assessed—you may be wondering how the IRS collection process works.

Although the collection process can vary depending on whether an IRS Revenue Officer is assigned, there are common steps the IRS follows. This article outlines the general IRS collection process for taxpayers in Columbus, Ohio.

If you owe tax to the IRS and cannot pay the balance in full, it is recommended that you speak with a tax attorney to discuss your options.

Initial IRS Notices for Unpaid Tax Debt

When a tax return is filed showing a balance due—or additional tax is assessed and not paid—the IRS will begin by issuing a notice of tax due.

The initial notice is typically informational and states:

• The amount of tax owed
• The tax period
• A request for payment

You may receive multiple notices reflecting updated balances as penalty and interest accrue.

Escalation of IRS Collection Notices

If the tax debt remains unpaid, the IRS will issue more serious notices.

One example is the CP 504 Notice, which threatens levy action and allows the IRS to intercept a state tax refund.

If the debt is still not resolved, the IRS may issue a Final Notice of Intent to Levy (LT11).

The Final Notice provides you with the right to request a:

• Collection Due Process (CDP) Hearing, or
• Equivalent Hearing

If you request a hearing, the case is assigned to an IRS Appeals Officer, and you have the opportunity to propose a collection alternative, such as:

• An Installment Agreement
• An Offer in Compromise
• Other alternatives to levy or enforcement

If you do not request a hearing or do not establish an agreement, you are then subject to IRS enforcement action.

IRS Levy and Wage Garnishment Process

If enforcement begins, the IRS may issue a bank levy. When a bank levy is issued:

• The bank must hold funds in your account for 21 days
• During that 21-day period, you may seek a full or partial release
• After 21 days, the funds are sent to the IRS and credited to your tax balance
  

Wage Garnishment

If the IRS issues a wage garnishment:

• A portion of your income is exempt
• Income above the exempt amount is sent to the IRS

Wage garnishments can be adjusted or released, but you must act and work with the IRS.

Notice of Federal Tax Lien

In addition to levy action, the IRS may file a Notice of Federal Tax Lien, even if the taxpayer owns little property.

The federal tax lien:

• Is a matter of public record
• Attaches to all property and rights to property
• Provides notice to creditors

The most common asset affected is real estate. For example:

• If a home is sold and sufficient equity exists after satisfying the mortgage, the IRS may receive proceeds at closing to satisfy the tax debt.
• If insufficient equity exists, the taxpayer may need to request a Certificate of Discharge, which releases the lien from the specific property (but not the overall tax debt) to allow clean title transfer.

When an IRS Revenue Officer Is Assigned

Many tax debts are assigned to an IRS Revenue Officer for collection.

When assigned, the Revenue Officer will generally:

• Issue the Final Notice of Intent to Levy
• File a Notice of Federal Tax Lien
• Request financial statements and supporting documentation

You may propose an Installment Agreement directly to the Revenue Officer.

You may also submit an Offer in Compromise through the Revenue Officer, although the determination is made by the IRS Offer in Compromise Unit.

How to Stop Active IRS Collections

Entering into a formal resolution can remove a debt from active collection status.

Options include:

• Establishing an Installment Agreement
• Submitting an Offer in Compromise
• Being placed in Currently Non-Collectible Status

Formalizing one of these options can prevent levy or enforcement action.

Speak With a Columbus, Ohio Tax Attorney About IRS Collection

If you owe taxes to the IRS and cannot satisfy the debt, it is strongly recommended that you consult with an experienced tax attorney.

You can contact The McGuire Law Firm to speak with a Columbus tax attorney who assists taxpayers throughout Ohio with IRS collection matters, levy defense, and tax resolution options.