What to Expect If You Owe Back Taxes
You’ve received a notice from the IRS, filed a tax return showing that you owe taxes, or discovered a tax liability on your IRS account online—now what? What happens if you owe taxes to the IRS? Well, the IRS has a thorough collections process that it follows in an attempt to recover unpaid taxes.
Even if you cannot afford to pay your tax liability, you should still file timely to avoid hefty late-filing penalties. To avoid IRS collections, you should be proactive. If you can’t pay in full, other payment options can help you stay in good standing with the IRS, including installment agreements, offers in compromise, and currently not collectible status. But if you don’t make arrangements, you will face the agency’s collection process as detailed throughout this post.
Key Takeaways
- IRS Collections – If you owe taxes, the IRS will attempt to collect using the Automated Collection System, a third-party collection agency, and/or a revenue officer.
- What to expect – IRS collections start with notices but can escalate to forced seizure of wages, cash, and other assets.
- Timeline – The collections process lasts several months or even years, as the IRS tries to give taxpayers time to pay voluntarily.
- How to avoid collections if you can’t afford to pay – There are multiple payment options, including payment plans and offers in compromise.
- Why you should be proactive – Waiting too long to take action puts you in danger of liens, levies, and wage garnishment.
Why People Owe Back Taxes
There are several situations that result in the assessment of a new tax debt:
- Filed but didn’t pay – You may file a tax return that indicates you owe money. If you do not pay that tax debt in time and in full, you now have a tax liability.
- Failure to file – You may also have tax debt if you fail to file a tax return. When this happens and the IRS receives tax documents for you—such as a W2 or 1099—they create a return for you. This is called a Substitute for Return, and it does not decrease your tax debt via credits or deductions, so it’s rarely a fair assessment of what you would owe.
- Audits or adjustments to filed returns – You may also receive notice of a new tax debt after the IRS conducts an audit, adjusts your return, and assesses new taxes and penalties.
- Delinquency Penalties – You may not owe taxes, but still have a liability due to late-filing, late-furnishing, or late-payment penalties.
When you receive a tax debt notice from the IRS, verifying its accuracy is important. If you’ve made recent payments or applied for any form of relief, the notice may not be entirely correct. You can access your tax transcript by checking your online IRS account or requesting records via mail or phone call.
IRS Notices and the Automated Collection Process
The IRS contacts taxpayers many times before proceeding with enforced collection actions. There are generally four to eight weeks between each notice, so by the time a lien or levy is on the table, a taxpayer has likely known for months that the IRS is trying to secure payment.
The notices from the IRS generally come in this order:
- CP14: This is the first bill you receive, notifying you of your balance due.
- CP501: The IRS sends out a first reminder if you do not pay in full or set up payment arrangements after the initial notice.
- CP503: The second reminder is slightly more urgent, reminding taxpayers that their taxes are still unpaid.
- CP504: This notice is significantly more urgent than past notices, telling you that you face levies if you do not pay your taxes by the deadline and notifying you that the IRS is going to seize your state tax refund.
- LT11 or Letter 1058: This is the most serious notice the IRS sends out in the standard collections process. Known as the Final Notice of Intent to Levy, this letter is your official notice that the IRS intends to levy your assets. Legally, the IRS must send a letter by certified mail no less than 30 days before levying certain assets, and this letter satisfies that requirement. This notice also informs you of your right to a Collection Due Process hearing, during which you can challenge the amount of the debt (if you haven’t had a chance to do so previously) or the IRS’s proposed collection action.
The IRS sends the first several notices through the Automated Collection System, often shortened to ACS. This computerized system generates notices based on the amount of a tax debt, how long it has been owed, and the length of time since the last notice was sent. The ACS also handles setting up payment plans and starting collection actions like wage garnishments or bank account freezes.
Revenue Officer Assignment
Rather than using the ACS, the IRS may assign your account to a Revenue Officer. They are personally tasked with collecting your back taxes. That means they can help you set up payments, but it also means that they will try to collect the debt involuntarily if you don’t cooperate.
The IRS assigns accounts to Revenue Officers if:
- You owe a substantial tax debt.
- You have a history of noncompliance.
- You have a seriously delinquent debt, and your passport may be revoked.
- Your business owes trust fund taxes, such as certain payroll or excise taxes.
- You owe a sizable Trust Fund Recovery Penalty.
- You have a complex tax situation.
A Revenue Officer has more leeway to initiate aggressive collection actions, including seizing your physical assets and investments, so it’s important to handle your tax debt before it gets to this point.
Enforced Collection Actions
The IRS always prefers voluntary payment of taxes, which is why they give taxpayers so much time and so many notices before they move forward with levies, liens, and other more aggressive options. However, if a taxpayer ignores IRS communications and does not take steps to set up payment arrangements, the IRS may need to move forward with wage garnishment, a levy, or a lien. Here’s what to expect:
Federal Tax Liens
A federal tax lien is generally one of the first steps the IRS takes toward collecting a tax debt. A tax lien is the government’s claim to your property—it applies to all of your assets. The IRS files liens publicly, so creditors and others are able to view them.
While liens do not affect your credit score anymore, they can keep you from getting credit if creditors pull up your lien. Additionally, a lien can make it very difficult to sell, refinance, or borrow against an asset, such as your home or other real estate.
Levies
Levies actually assert the government’s right to your property by seizing your assets and using them to pay back your tax debt. Depending on how much you owe and what prior collection actions the IRS has utilized, they may levy (garnish) your wages, bank accounts, physical property, and retirement funds.
Passport Revocation
The IRS may ask the U.S. State Department to revoke your passport or deny your application once you become seriously delinquent. The amount needed to be “seriously delinquent” changes each year to account for inflation. As of 2025, a taxpayer owing at least $65,000 is considered seriously delinquent.
How Long Does the IRS Have to Collect Back Taxes?
These collection efforts can’t last forever, so how long does the IRS have? The Collection Statute Expiration Date, or CSED, is the end of the time when the IRS can continue to attempt to collect taxes. This is generally 10 years from the date of the assessment. This may be assessments from returns you’ve filed or amended, assessments from Substitute for Return filings, and audit assessments.
How to Stop the Collection Process
There are a few ways to stop or at least pause the collection process. Ideally, you’ll begin exploring these options before the IRS takes action against you. It’s much easier to prevent levies and liens than it is to walk them back.
Requesting a CPD Hearing
If you’ve received a notice stating that you can request a Collection Due Process hearing, you may do so to stop collection efforts temporarily. Note that you generally only have 30 days from the date listed on the letter to request a hearing. Your hearing allows you to appeal the impending collection action and discuss payment options. If you haven’t had a chance to dispute the tax amount due, you can do so during this meeting, but that option is not always available.
Setting Up Payment Arrangements
If you set up an installment agreement or get approved for an offer in compromise, the IRS will not pursue collections against you. However, you need to be proactive. If you wait until the IRS is garnishing your wages or seizing your assets, requesting payments won’t always stop those actions. In general, the IRS will not pursue collections while reviewing your request for payments or settlements.
Getting Your Account Marked as Currently Noncollectible
If you can’t pay anything, contact the IRS and ask about hardship. If you qualify for currently noncollectible status, the IRS will not pursue any collections against you. However, they will monitor your account and resume collections if your finances improve. The IRS will also generally file a Federal Tax Lien in exchange for placing an account in currently not collectible (CNC) status.
The Role of Communication
Remember that until you contact the IRS, either on your own or through your tax attorney, they have no way of knowing if you are receiving their letters, if you have any plans of paying what you owe, or even if you are planning on fleeing the country to avoid your tax debt. The IRS generally does not like pursuing aggressive collection actions, but will do so when other efforts fail.
That’s why it’s important to communicate with the IRS upfront, explain your situation, and look for a tax relief option that suits you. This is where having a tax attorney can be very beneficial. We’ll take over communications with the IRS on your behalf, saving you stress and energy.
Your Options for Resolving Back Taxes
There are numerous ways you can pay off your back taxes—the right option for you depends on how much cash you have on hand, your other assets and equity, your overall financial situation, and how much time is left until the collection statute expiration date (CSED). The CSED is the last date in time the IRS can attempt to collect on a debt.
- Payment in Full – Obviously, this is the quickest option to resolve your debt. You don’t have to worry about penalties, interest, or any further bills or follow-up notices from the IRS.
- Installment Agreement – Those who owe up to $50,000 can request a standard installment agreement. This spreads your payments out over up to 72 months. If you owe more or need more time, you can still request payments, but you’ll need to provide the IRS with details about your finances.
- Partial payment installment agreement – A lesser-known option is the partial payment installment agreement. If you cannot afford the minimum payment for the installment agreement but can afford to put some money toward your debt, the IRS may agree to accept smaller monthly payments until the CSED runs out, resulting in only a partial payment of your tax debt.
- Offer in Compromise – An offer in compromise allows approved taxpayers to settle their tax liability for less than they owe. Most people apply due to doubt as to collectibility—when you owe the money, but the IRS is unlikely to be able to collect it.
The application process requires you to make a full financial disclosure, and less than half of all applicants are accepted. However, if you have limited assets and income proportionate to your tax debt, this may be a viable option for you. You can also apply due to doubt as to liability or effective tax administration.
- Penalty Abatement – The IRS has two main pathways to penalty relief. First-time penalty abatement is available to taxpayers with a history of tax compliance and no penalties. The other option is reasonable cause abatement, which is offered to those who have a valid reason for failing to file or pay on time. For example, a serious illness or death in the immediate family or a natural disaster may qualify.
- Innocent Spouse Relief – When one spouse runs up a tax bill by claiming improper deductions or failing to report income, the other spouse may be granted relief if they can prove that they did not know about the errors or had no reason to know about them.
How to Meet IRS Requirements—Even If You Can’t Pay in Full
While the IRS has a reputation for being unyielding and inflexible, they do understand that circumstances can cause people to fall behind on their taxes. Even if you are unable to pay your taxes in full and on time, you can remain compliant with IRS regulations and requirements by following these tips:
- File on time: It is much better for you to file on time and pay later than it is to wait to file until you can pay. When you file on time, you avoid the failure-to-file penalty and at least know how much you owe.
- Read all notices immediately: You don’t want to only find out that the IRS is after you when you receive a Final Levy Notice, after the agency has been trying to collect payment for months. Open notices as soon as you receive them, read to find out what the IRS is asking, and figure out your options.
- Communicate right away when there’s an issue: When the IRS knows that there’s an issue and a taxpayer is trying to rectify it, you’re more likely to avoid liens, levies, and other aggressive collection actions. You can reach out to them directly or communicate with them via a tax attorney.
- Look for solutions early: If you wait until the IRS is about to seize your assets to start comparing payment options, you’re doing yourself a great disservice. Start exploring payment and relief options as soon as you know you are unable to pay in full. This shows that you are making a good-faith effort to pay your taxes.
How a Tax Attorney Can Make a Difference
At Wiggam Law, we understand how confusing and overwhelming tax problems can be. But the sooner you reach out for help, the easier it is to find solutions and avoid unnecessary penalties. We’ll manage all communication with the IRS on your behalf, ensuring you don’t have to stress over phone calls or documentation requests.
After an in-depth review of your taxes and financial situation, we’ll bring you up to speed on your payment options and what we recommend for your financial future. Our goal: reduce penalties, prevent liens, and protect you from losing your assets and income to levies.
If you owe taxes and are unsure where to turn, the team at Wiggam Law is here to help you explore your options. Take action now and make sure you have the guidance you need as you navigate IRS collection procedures. Call us at (404) 233-9800 or reach out online to set up a time to meet with our team.
IRS Collections Frequently Asked Questions
What happens after I get CP14 from the IRS?
This is the first notice you get from the IRS when you owe money, so you have time before you’re in imminent danger of levies or liens. This is the ideal time to talk to a tax attorney or the IRS about payment plans and other options.
How long does the IRS have to collect tax debt?
They have 10 years from the date of assessment. However, this can be extended (tolled) by certain actions such as requesting a payment plan, filing an Offer in Compromise, and filing for Bankruptcy. You should consult with a competent tax attorney or enrolled agent to determine the IRS’s deadline to collect any taxes you owe.
When will a Revenue Officer show up at my door?
The IRS no longer sends Revenue Officers to visit taxpayers unannounced. Instead, they send a 725-B letter to schedule a face-to-face meeting or phone call.
Can I stop IRS collections if I can’t afford to pay?
If your income and assets are limited enough that you cannot afford to pay anything, the IRS may declare you currently not collectible. However, you will have to go through extensive financial disclosures to prove that you qualify.
What’s the difference between ACS and a Revenue Officer?
The Automated Collection System handles most tax cases, requiring minimal human intervention. A Revenue Officer may be assigned to cases involving seriously delinquent tax debt or multiple failed attempts to collect.
Will the IRS settle for less than I owe?
The IRS may settle for less than you owe via an offer in compromise. Although less than half of the applications are approved, this may be an option if you have minimal assets and income compared to your tax debt.
How can I get declared currently not collectible?
You may apply for currently not collectible status by working with the IRS and filing a Collection Information Statement like the 433-F, 433-A, and/or 433-B. They will make their decision after thoroughly reviewing your finances.
What do I do if I haven’t filed taxes in years?
Not filing for years may be an urgent situation, as the 10-year CSED doesn’t start until taxes are assessed. This means that even if your unfiled taxes are years old, the timer hasn’t started if the IRS has not filed a Substitute for Return for you. In other words, the agency can go back an unlimited amount of time to assess taxes against you. You should talk to a tax attorney about filing old returns and getting caught up to avoid heavy penalties.
