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What you need to know about the IRS tax collection process

On Behalf of | Dec 7, 2021 | Back Taxes or Tax Debt |

While most U.S. citizens are tax compliant, a minority of taxpayers do not adhere to the U.S. tax law. The Internal Revenue Service(IRS), however, exists primarily to ensure that those who don’t conform to the tax system remit their tax payments fairly.  

The IRS collection process involves actions to collect any owed taxes resulting from failure to voluntarily pay your taxes on time. Most taxpayers undergo multiple challenges once they fail or delay paying their taxes. 

How IRS collections work in Washington, D.C.

Once you file your tax return and confirm that your correct tax bill is fully paid, the amount is filed in IRS records. If you are indebted, the IRS will send you a tax bill, including interest and penalties. Failure to clear the outstanding debt or make arrangements for payment, the IRS takes action on debt collection. 

What happens if the IRS sends you to collections?

As per IR-202191, September 22, 2021, in Washington D.C., all the taxpayers with unpaid tax bills are contacted by Private Collection Agencies(PCAs) appointed by the IRS to collect overdue tax bills. The agencies appointed are Conserve, CBE Group, Inc., and Coast Professional, Inc.

The IRS starts by sending a letter to you and your tax representative to inform you that your account has been assigned to a Private Collection Agency. The name and contact details of the PCA are given to you as well. Also, a  copy of Publication 4518 is included. 

After that, the PCA contacts you and your representative to confirm the account transfer. Once the IRS sends a notification, the PCA will send a transfer confirmation letter to you and your representative. 

Your privacy as a taxpayer is protected by IRS letters and PCA’s letters containing information that helps you identify the tax amount owed and their identity. You are also assured that any calls received from PCA are legitimate.

Negotiating with IRS collections

As a resident of Washington D.C., you can negotiate to settle your outstanding tax less than the actual amount you owe. It is a legitimate solution if you are not able to pay your total tax. You can request a payment plan as well.

There are short-term payment plans of up to 180 days for individual taxpayers owing up to $100,000. Another alternative is a monthly payment. There are also arrangements for corporate firms. 

How does IRS collection affect your credit? 

The IRS will only report to the credit bureaus once you refuse to clear your overdue tax debt. For instance, when you pay a tax bill and end up owing more than usual, this will not affect your credit score.