For many US taxpayers, an IRS letter brings a wave of anxiety, but this year, those feelings might become more common. Because the IRS is making a big push to collect taxes that are owed, which means more collection notices are hitting mailboxes across the country.
It is easy to feel overwhelmed or even a little scared when you owe taxes. But getting a notice is not a dead end. There is a reason this is happening, and more importantly, there are clear, established ways to handle it.
Still confusing? It is understandable, so professional help is available. We have successfully resolved tax problems for over 79,000 clients, and we know the path to a solution. Let us explain why you might get a notice and what steps you can take.
Why is the IRS Ramping Up Collections Now?
Several factors are fueling this increase in IRS collection activity.
A major reason is increased funding. Thanks to laws like the Inflation Reduction Act of 2022, the IRS has more resources. While some funds have been shifted, a significant amount is dedicated to improving taxpayer services and, yes, enforcement.
Although the IRS had planned to hire thousands of new staff members over the next couple of years specifically for enforcement roles, recent budget cuts and policy changes have significantly hindered these hiring efforts. Instead of expanding manpower, the agency is now relying more heavily on automated systems and standardized notices to reach taxpayers and collect unpaid debts.
Another key factor is the “tax gap.” This is the difference between what taxpayers should pay and what they actually pay on time. To address this, closing this gap is a major priority for the government, and increased collection efforts are a direct way to tackle it.
Finally, things are getting back to “normal” after the pandemic. During the height of COVID-19, the IRS paused many collection activities to ease the burden on taxpayers. Those pauses have largely ended, and the agency is working through its backlog.
What does this mean for you? It means that if you have an outstanding tax debt, even if it is from a few years ago or is not a huge amount, there is a higher chance the IRS will reach out this year.
IRS Collection Notices
All IRS notices are not equal; each one tells you something specific about your situation and what might happen next.
- CP14: This is usually the first notice. It simply states that you owe money and asks you to pay it.
- CP501-502-503: If you do not respond to the first notice, you will start getting these. They are stronger reminders that you have a balance due.
- CP504: It informs you that the IRS intends to levy your assets due to unpaid tax debt. This may include things like your state tax refund.
- The Final Notice (LT11/Letter 1058): This is the last stop before the IRS can legally act, like levying your bank account or garnishing your wages. It also explains your right to request a Collection Due Process (CDP) hearing. This is your critical window to appeal or arrange.
- CP40: Sometimes the IRS hands certain overdue accounts to private collection agencies. The CP40 notice tells you this has happened and provides details about the agency assigned to your case.
Shortly, always open IRS mail and pay close attention to the notice number and the date. These details tell you where you are in the process and how much time you have to respond.
What Happens If You Owe the IRS and Do Not Pay?
It will only get worse and cause more damage. The consequences of not paying can be severe and far-reaching.
First, your debt grows. The IRS charges penalties for failing to pay on time, and interest accrues on both the unpaid tax and the penalties. This can quickly make manageable debt unmanageable.
Next, the IRS can place a Federal Tax Lien on your property. This is a public claim against everything you own (like your house, car, or other assets) and everything you acquire while the lien is in place. A tax lien can significantly impact your credit and make it harder to qualify for loans, but it does not automatically disqualify you from getting one.
If a lien does not work, the IRS can move to a levy. This means they can legally take your property to satisfy the debt. This is not limited to physical items. They can:
- Take money directly from your bank accounts
- Garnish your wages, meaning your employer sends a portion of your paycheck to the IRS
- Seize your Social Security or retirement income (within certain limits)
What if you owe the IRS over $25,000? While the IRS pursues all debts, larger balances often attract more attention and can lead to more aggressive actions sooner.
In cases of significant tax debt (currently over $62,000 for 2024, adjusted annually), the IRS can even certify your debt to the State Department, which can then deny your passport application or revoke your current passport, preventing you from traveling internationally.
Dealing with the IRS Collections Department
The IRS Collections Department is the agency responsible for these actions. Their job is not customer service, it is to collect the money owed to the US Treasury. While they must follow rules and respect taxpayer rights, their goal is clear. Understanding their perspective helps you know how to interact with them effectively.
The Clock is Ticking: Understanding the IRS 10-Year Collection Statute (CSED)
Does the IRS have forever to collect what you owe? Generally, no. There is a rule called the Collection Statute Expiration Date. In most cases, the IRS has 10 years from the date your tax was assessed (usually when you filed or shortly after) to collect the debt. After that 10-year window closes, they cannot pursue it anymore.
But it is not always a simple 10-year countdown. Many people ask, “Why is the IRS trying to collect after 10 years?” This happens because certain actions can hit the “pause” button on that 10-year clock.
Here are common actions that can pause or extend the CSED:
- Filing for Bankruptcy: The clock stops while your bankruptcy case is active, plus an extra 6 months.
- Requesting an Offer in Compromise (OIC): The clock stops while the IRS considers your offer, plus 30 days if rejected, and longer if you appeal.
- Requesting an Installment Agreement (IA): The clock stops while your request is pending.
- Requesting a Collection Due Process (CDP) Hearing: The clock stops while your appeal is being considered.
- Living Outside the US: If you are out of the country for 6 months or more, the clock stops until you return.
Your Options When You Receive an IRS Collection Notice
Okay, you have received a notice. The absolute worst thing you can do is stick it in a drawer and hope it goes away. It will not. But you have options. Taking proactive steps puts you in a much stronger position.
- Read the notice carefully. Then, make a plan to respond before the deadline.
- Make sure the notice is legitimate (scams exist!). Check the IRS website or call them if you are unsure. Then check if the amount seems correct. Errors can happen.
- Explore your resolution options: The IRS knows people cannot always pay everything at once. They offer several ways to resolve tax debt:
- Pay the debt: If you have the funds, paying in full is the fastest way to stop penalties and interest.
- Request a short-term extension: You might be able to get up to 180 more days to pay in full.
- Set Up an Installment Agreement (IA): This lets you make monthly payments over time (often up to 72 months). This is a common solution, but sometimes people ask, “Why is the IRS sending me a collection notice if I am paying monthly?” This can happen if you owe new taxes for another year, if you missed a payment on your IA, or if the IRS is conducting a routine review of your agreement. It’s crucial to stay current.
- Make an Offer in Compromise (OIC): This allows some taxpayers to settle their debt for less than the full amount owed. However, the IRS has strict eligibility requirements based on your ability to pay, income, expenses, and asset equity.
- Request “Currently Not Collectible” (CNC): If you can prove you’re experiencing severe financial hardship and can’t afford any payment, the IRS might temporarily pause collections. They will review your situation periodically.
- Consider professional tax help. If your debt is large, if you are dealing with multiple tax years, if you are facing liens or levies, or if you simply feel overwhelmed, getting help from a qualified tax professional is a smart move. They know the system, speak the language, and can negotiate on your behalf.
Take Control of Your Tax Debt Today Before the IRS Does
The IRS’s message is clear: collection efforts are increasing. Receiving a notice can be alarming, but burying your head in the sand is the riskiest move you can make. No matter how complicated your situation, solutions always exist.
Taking that first step (opening the mail, making a call, seeking help) empowers you and starts you on the road to resolution.
Do not wait for the next, more serious notice. If you owe the IRS, let our team of experts fight for you.
Frequently Asked Questions
There is no single “minimum.” For an Installment Agreement, it depends on how much you owe and how quickly you can pay it off within the rules, balanced with your ability to pay. For an Offer in Compromise, it’s a complex calculation based on your financial situation.
The IRS focuses audits where they suspect errors are most likely. This often includes self-employed individuals, taxpayers claiming certain credits (like the Earned Income Tax Credit), high-income earners, and cash-based businesses. Remember, an audit can cause a tax debt that then leads to collection notices.
The IRS collects most of its revenue from individual income taxes and payroll taxes (the Social Security and Medicare taxes withheld from your paycheck).
It can be very difficult, but it’s sometimes possible. You usually need to pay the debt in full immediately or negotiate a payment agreement and prove it to the IRS. This often requires quick action and professional assistance.
Outstanding tax debts are typically managed through three primary IRS collection methods.
- Revenue Officer: Your case might be assigned to an individual IRS Revenue Officer, especially if it is complex or involves a high amount.
- Private Collection Agency: The IRS outsources certain overdue tax accounts to private collection agencies.
- Automated Collection System (ACS): Many cases are handled through the IRS’s ACS, which primarily uses notices and phone calls to collect the debt.
If you fall into this category, you will first receive an IRS notice called CP14. Expected to arrive around June, this is a formal, legally required notice informing you that you have an unpaid tax balance and stating the amount you owe.
