What happens when the IRS sends you to collections?
Dealing with the IRS can be a daunting experience, and one of the most stressful situations is when you receive a notice that the IRS has sent your tax debt to a collection agency. This can happen for various reasons, such as failure to pay your taxes on time, not filing your taxes, or owing back taxes. When the IRS sends you to collections, it’s important to understand the process and take immediate action to resolve the issue. Here’s what you need to know about what happens when the IRS sends you to collections.
Understanding the Collection Process
When the IRS decides to send your tax debt to a collection agency, it’s typically because they have exhausted all other options for collecting the debt. This may include sending you multiple notices, making phone calls, or even filing a lien on your property. Once the IRS has decided to send your debt to a collection agency, the process typically involves the following steps:
1. Notification: You will receive a notice from the IRS informing you that your debt has been sent to a collection agency. This notice will include information about the amount owed, the collection agency involved, and instructions on how to resolve the debt.
2. Collection Agency: The IRS works with various collection agencies to recover tax debts. These agencies are independent contractors and have the authority to collect the debt on behalf of the IRS.
3. Communication: The collection agency will begin communicating with you to discuss the debt and explore options for repayment. This may include setting up a payment plan, negotiating a reduced settlement, or discussing other arrangements.
4. Legal Action: If you fail to respond to the collection agency or fail to make payments, the agency may take legal action to recover the debt. This could include garnishing your wages, levying your bank accounts, or seizing your property.
What to Do When Sent to Collections
Receiving a notice that your tax debt has been sent to collections can be overwhelming, but it’s important to stay calm and take the following steps:
1. Review the Notice: Carefully review the notice from the IRS and the collection agency to ensure that the information is accurate. If there are any discrepancies, contact the agency to correct them.
2. Contact the Collection Agency: Reach out to the collection agency to discuss your debt and explore repayment options. Be honest about your financial situation and ask about any available assistance programs.
3. Negotiate a Repayment Plan: If you’re unable to pay the full amount owed, ask the collection agency about setting up a payment plan. Many agencies are willing to work with taxpayers to create a manageable repayment schedule.
4. Consider Tax Debt Relief Programs: Depending on your financial situation, you may qualify for various tax debt relief programs, such as an offer in compromise or an installment agreement. Consult with a tax professional to determine which option is best for you.
5. Stay Compliant: Once you’ve entered into a repayment plan or resolved your debt, it’s crucial to stay compliant with the IRS. This means filing your taxes on time and paying any taxes owed promptly.
Conclusion
When the IRS sends you to collections, it’s essential to take immediate action to resolve the debt. By understanding the collection process, communicating with the collection agency, and exploring available options, you can work towards resolving your tax debt and avoiding further legal action. Remember, seeking professional help from a tax attorney or certified public accountant can make the process smoother and ensure that you receive the best possible outcome.
